Bruce Billson (Dunkley, Liberal Party, Shadow Minister for Small Business, Competition Policy and Consumer Affairs) Share this | Link to this | Hansard source

I rise to speak on the government's Superannuation Laws Amendment (Capital Gains Tax Relief and Other Efficiency Measures) Bill 2012 and Superannuation Auditor Registration Imposition Bill 2012.

The Superannuation Laws Amendment (Capital Gains Tax Relief and Other Efficiency Measures) Bill 2012 contains a range of measures implementing various changes to superannuation and income tax acts. The first schedule of this bill seeks to reinstate capital gains tax temporary loss relief and asset rollover for complying superannuation funds, other than self-managed superannuation funds, and approved deposit funds seeking to merge. These changes will see loss relief applied to transfers and from pool superannuation trusts and life insurance companies, as well as superannuation funds and approved deposit funds. This loss relief will be welcomed by some in the superannuation sector who missed the window when the opportunity for this relief was first granted in 2008 following the impact of the global financial crisis on equity markets and the impact that in turn had on the superannuation sector. The coalition supported the tax relief for merging super funds at the time as a sensible measure to ensure otherwise sensible mergers of superannuation funds were not prevented by taxation considerations. This bill seeks to again implement this measure on a temporary basis, this time for mergers that occur on or after 1 October 2011 and before 2July 2017. The coalition is supportive of this measure and understands the importance this has for the sector.

Schedule 2 of the Superannuation Laws Amendment (Capital Gains Tax Relief and Other Efficiency Measures) Bill 2012 seeks to introduce a new registration regime for auditors of self-managed superannuation funds, SMSFs. While the government's Superannuation Auditor Registration Imposition Bill 2012 establishes the framework of the new registration regime for SMSF auditors, some of the detail has been left to regulations. The coalition will be moving an amendment to excise schedule 2 from the Superannuation Laws Amendment (Capital Gains Tax Relief and Other Efficiency Measures) Bill 2012. The coalition will be doing this on the grounds that we believe these provisions are yet another example of onerous regulation from a government addicted to applying red tape to the financial sector. No argument or evidence has been advanced by the government that current regulatory arrangements involving the tax office, the Tax Practitioners Board and the accounting professional bodies are failing or in some way deficient. I can state, however, that the coalition will not oppose this bill if our amendments are unsuccessful. We are doing this because we understand it is important to reinstate capital gains tax temporary loss relief and asset rollover for complying superannuation funds—and we would like to see these measures pass the parliament. The coalition will, however, use this opportunity to express our disappointment yet again at this government for the onerous regulatory impost it continues to impose on the superannuation sector.

The Superannuation Auditor Registration Imposition Bill 2012 establishes the framework of the new registration regime for SMSF auditors, although some of the detail has been left to regulations. The bill lists a raft of new regulatory compliance measures on the sector such as the compulsory registration of self-managed superannuation fund auditor and the professional development requirements that will have to be met by self-managed superannuation fund auditors. Not only does the Superannuation Auditor Registration Imposition Bill 2012 set out a raft of new regulatory requirements but also it imposes a variety of new fees. One such detail is the fees to be charged. The legislation before the House seeks to allow a new application fee for registration as an approved SMSF auditor to be paid by the applicant; a new fee will be payable when an applicant is undertaking a competency examination; when a statement is made to ASIC in accordance with this new legislation a new fee will be payable, with a further fee payable if this statement was given one month after it fell due; and, a fee is also required to be paid when a person provides a change in particulars to ASIC in accordance with the legislation, with a further fee payable if this is given one month after such changes.

Under this new regime these fees are expected to not exceed a maximum of $1,000; however, there is no detail in the legislation, as it has been left to regulation. But there was a clue in the second reading speech from the Minister for Financial Services and Superannuation and the Minister for Workplace Relations. He indicated that self-managed superannuation fund orders will be subjected to a $100 initial registration fee for an online application, a $100 fee to take a competency exam in addition to a $50 fee for an annual statement to ASIC.

According to the regulatory impact statement, SMSF trustees will be subject to an approximate $14 increase in their SMSF levy, which will be paid annually. But how can those impacted by this legislation trust that the government will not increase these fees and charges, in light of what was handed down in MYEFO only last week? The government's early MYEFO, the one it handed down to avoid disclosing the true state of mining tax revenues, revealed a detraining budget position—yet, again the government chose to hit the self-managed superannuation sector by smacking it with higher fees. The increase to the SMSF fund levy from $191 to $259 will hit 480,000 self-managed superannuation funds and will raise $320 million over the forward estimates. This raid was also so the government could bolster its bottom line. Over half of the government's promised surplus in 2012-13 will be achieved through ripping even more money out of the superannuation system, a system already undermined by Labor's consistent tax grabs since coming to power.

As stated previously, the coalition will be opposing measures which impose further onerous regulatory requirements on self-managed superannuation funds. Schedule 3 of the Superannuation Laws Amendment (Capital Gains Tax Relief and Other Efficiency Measures) Bill 2012 aims to expand the reporting obligations for superannuation providers. Currently, a superannuation provider is only required to report about individual accounts if they have received contributions throughout the year and either the superannuation interest is held at the end of the period or the member received a benefit during the period. Effectively, no statement is requirement for inactive superannuation accounts. Under the revised reporting obligations funds will be required to provide statements for all members, both active and inactive. This is to support the implement the Stronger Future package, in particular the measures designed to facilitate consolidation of superannuation funds and accounts. The first member statements are due out by October 2013.

The changes contained within schedule 4 of the Superannuation Laws Amendment (Capital Gains Tax Relief and Other Efficiency Measures) Bill 2012 seek to amend the Superannuation Industry (Supervision) Act 1993 and the Retirement Savings Account Act 1997 to improve the linking of tax file numbers to superannuation accounts with the intended purpose of making them less likely to become inactive. These changes will enable the commissioner to keep a register containing information necessary to facilitate the transmission of information and electronic payments, and allow the commissioner to require information from an employer to determine whether regulations and standards are being met. The commissioner may disclose a member's tax file number to a superannuation fund only when the member has quoted their TFN in another superannuation fund with which they have an account. Trustees of eligible superannuation entities will the check the tax file number with the commission to ensure accurate information is being recorded, along with employers checking employees' tax file numbers. It should be noted that any member of a superannuation fund is not legally required to quote their tax file number. This legislation does not change that.

As stated at the outset on this debate on the bill, the coalition supports measures within the Superannuation Laws Amendment (Capital Gains Tax Relief and Other Efficiency Measures) Bill 2012 which seek to reinstate capital gains tax temporary loss relief and asset rollover for complying superannuation funds other than self-managed superannuation funds and for approved deposit funds seeking to merge. This measure will be welcome by those in the market who did not take advantage of this opportunity when it was originally offered back in 2008, during the heights of the global financial crisis. The coalition supports this measure.

However, as I have stated, the coalition does not approve of the additional regulatory burdens and fees that schedule 2 of the Superannuation Laws Amendment (Capital Gains Tax Relief And Other Efficiency Measures) Bill 2012 and the Superannuation Auditor Registration Imposition Bill 2012, imposed on the self-managed superannuation fund sector—particularly in light of the light of the increase charges the government handed down in it rushed MYEFO last week. The coalition will move detailed amendments to excise schedule 2 from the Superannuation Laws Amendment (Capital Gains Tax Relief And Other Efficiency Measures) Bill 2012. If our amendments are unsuccessful then the coalition will not oppose this bill or the Superannuation Auditor Registration Imposition Bill 2012.

Michelle Rowland (Greenway, Australian Labor Party) Share this | Link to this | Hansard source

I am very pleased to support the Superannuation Laws Amendment (Capital Gains Tax Relief and Other Efficiency Measures) Bill 2012 and the Superannuation Auditor Registration Imposition Bill 2012. These bills demonstrate the commitment of the government to increase the efficiency and effectiveness of the Australian superannuation system. The measures in these bills further the efforts of the government in its Stronger Super reform activities, about which I will say more in a moment. Australians can be confident that this Gillard Labor government is acting decisively in the present to ensure that every Australian can retire with dignity in the future.

I note the argument of the previous speaker, the member for Dunkley, that there was no evidence for the need to include provisions requiring further audit regulation. I suggest he take a look at the detailed findings of the Cooper Review into the Governance, Efficiency, Structure and Operation of Australia's Superannuation System and its specific consideration of these provisions. At page 16 of the Self-managed Super Solutions report, dated 29 April 2010, the Cooper review stated:

Submissions consistently supported the view that it was not the level of trustee knowledge, or compliance activity that needed to be increased; rather it was the qualifications, competency and professional standards of SMSF service providers. The theme of raising standards reverberated across all stakeholders groups (members, auditors, accountants, administrators and industry associations).

The Panel believes that the SMSF sector should be serviced by providers who are required to attain and maintain a minimum level of SMSF competency. Minimum standards would be aimed at greater consistency among service providers. More importantly, it would provide members with greater protection and reduce the risk of inappropriate advice.

So it is far from being something that was not carefully considered and based on evidence. Maybe in his own time the shadow minister can pick up and read the rest of the Cooper review. The provisions that the member specifically attacked are about increasing the integrity and probity of the explosion in the growth of SMSFs. By definition, self-managed super funds are those with four or less members. In Australia, there is over $400 billion in assets under self-management, which is about a third of total superannuation assets. SMSFs are promoted by entities such as accountants and financial planners, and in some cases the SMSF option may be ill-suited to a person or to a person's specific situation.

Given the exponential growth of SMSFs—which are regulated by the ATO and not APRA—it is important to have confidence in the audit process. I think it would be a good thing under the proposed reforms that a trustee must have an audit by an approved SMSF auditor. By any objective measure, it is better than having an accountant doing the books who is also signing off on the audit side. The clear intention arising from the recommendations in the Cooper review is to improve the integrity and probity of the process, enabling funds to do best what they are designed to do, which is to generate retirement savings and not lead to circumstances such as those experienced by victims of the Trio or Storm incidents.

I know from discussions with the sector that cases abound, for example in agribusiness schemes being promoted to SMSFs, where funds are ill-suited to the risks involved, and beneficiaries then wonder why they lose money. The predictable arguments of overregulation are not based in fact, are not based on inquiry, and in fact have no relevance to what we are discussing here today. Unfortunately that is not anything new—and I refer to some recent commentary on superannuation issues. Following the government's Mid-Year Economic and Fiscal Outlook, announced last week, the member for North Sydney made a number of outrageous statements suggesting that Australians with superannuation accounts that were dormant for 12 months would have their superannuation transferred to the ATO as lost accounts. He told Alan Jones on 2GB:

If your kids go overseas for 12 months or you're unemployed for 12 months and you don't access your superannuation account, then it's going to the tax office.

These statements are a total misrepresentation of the government's MYEFO measure in this area. Whether it is the result of intent or ignorance I do not know. Both the minister's press release and the MYEFO document make it perfectly clear that it is only the accounts of unidentifiable members that will be transferred to the ATO after 12 months of inactivity. If your contact details are known to the super fund, this measure has no impact on you whatsoever.

It is absurd for the shadow Treasurer to repeatedly misrepresent the truth of this very important government measure. Of course, the member for North Sydney forgets that lost superannuation accounts can be claimed at any time through the ATO's SuperSeeker website. Furthermore, the relatively small number of Australians who will be impacted by this change will be better off in many instances. That is because they will not have their retirement savings chewed away by fees and costs charged by superannuation funds.

If the member for North Sydney were so concerned about the entitlements of Australians, what prompted him in April this year to tell the Institute of Economic Affairs in London that the entitlement mentality was over and that bestowing entitlements on people placed future economic stability at risk? The hypocrisy of the member for North Sydney is staggering for those of us on this side of the House. His contribution to the debate in this area has been typical of the misinformed and false commentary that they have given on this government's important superannuation reform agenda.

As I mentioned earlier, the government is proud of its commitment to improving the Australian superannuation system and responding to industry needs. It is no secret that the rationale for reinstating the taxation relief foreshadowed in the Superannuation Laws Amendment (Capital Gains Tax Relief and Other Efficiency Measures) Bill 2012, which I will refer to as the super CGT bill, is connected to the government's Stronger Super reform agenda. That agenda encourages increased size and scale of superannuation funds to provide a range of benefits to members, including enhanced product features, lower fees and greater potential for better investment returns from a larger pool of assets.

I have been fortunate to have had many discussions with members of the superannuation industry on this issue. A recurring theme with industry leaders is that tax considerations rank high for trustees of superannuation funds who are considering a merger. The value of a member's superannuation interest may include the tax benefit of unrealised net capital losses or revenue losses. In the absence of the optional loss relief and asset rollover contained in the super CGT bill, a merger may lead to a reduction in the value of the member's superannuation interest. In turn this can often act as a severe shackle on trustees of superannuation funds who are considering the merits of merging with one another. In fact, the trustees may decide to reject a merger proposal where there is a significant negative impact on member accounts.

The relief provided in the super CGT bill removes the obstacle to eligible funds merging that would otherwise exist because of the extinguishment of the tax losses. I note that the measures are designed to operate in respect of mergers that occur on or after 1 October 2011 and before 2 July 2017. These measures have been welcomed by the superannuation industry and there are some very recent examples of the benefits they will bring to the industry. Only last week two well-known industry funds—Asset Super and CareSuper—merged to create a fund with more than $6.5 billion under management and almost 270,000 members. In a press release dated 12 October 2012 from leading national law firm Corrs Chambers Westgarth, the legal counsel for Asset Super noted:

There is a great deal of merger activity in the superannuation industry at the moment and this is another example of the trend towards industry consolidation.

A key factor in the transaction was the availability of CGT relief for super fund mergers. The Government’s proposal to extend the availability of the CGT relief was critical in terms of enabling the merger to proceed.

In a joint release, dated 31 August 2012, from Asset Super and CareSuper regarding the merger, Julie Lander, CEO of CareSuper, commented:

… the estimated cost savings from merging are more than 15% per year just on business as usual activities. Looking ahead, further savings will be achieved with only one fund, rather than two, undertaking the significant amount of work needed to meet the new Stronger Super requirements.

The super CGT bill demonstrates this government's commitment to greater efficiency in the superannuation industry by providing for a reinstatement of the tax relief that the industry has been calling for. I am delighted to be part of a government that delivers such meaningful legislative responses to industry need.

I would now like to make some brief comments in relation to schedule 2 of the CGT bill and the Superannuation Auditor Registration Imposition Bill 2012. They contain initiatives which are largely designed to introduce a new registration regime for auditors of SMSFs, or self-managed superannuation funds. APRA's latest quarterly superannuation performance statistics noted that at 30 June 2012 there were 478,263 SMSFs in Australia, compared to 442,987 as at 30 June 2011. The APRA statistics also revealed that these SMSFs have a total of $439 billion in assets under management, accounting for 31.3 per cent of all superannuation assets in Australia. So there are clearly a huge number of SMSFs in Australia, and their numbers are growing at an exponential rate. Ensuring their compliance with superannuation and tax laws and the accuracy of their financial statements is vitally important to the industry and this government.

As I mentioned earlier, the Cooper review identified a number of issues in the existing SMSF scheme for auditors. These issues include the lack of SMSF auditor independence, with a number of approved auditors also acting as the SMSFs' accountants, as I mentioned earlier; differences in minimum competency standards for approved auditors; and differences in the enforcement actions applicable to approved auditors. Consequently, the Cooper review made a number of recommendations to address these issues, including that ASIC be appointed the registration body for SMSF approved auditors, be responsible for determining eligibility requirements and setting competency standards, and determine and take appropriate enforcement action with the assistance of the ATO.

Schedule 2 of the CGT bill and the Superannuation Auditor Registration Imposition Bill 2012 implement the government's response to those precise recommendations of the Cooper review in relation to auditor registration and independence. In essence, we have embraced the recommendations of the Cooper review in respect of SMSF auditor registration and independence. The government's objective in doing so is to raise the standard of SMSF audit competency and ensure there is a minimum set of standards that applies equally across the SMSF sector.

Those opposite may argue—as they have, indeed—that these are heavy burdens to place on the SMSF sector. The government flatly rejects such arguments. Given the size of the SMSF sector in the superannuation industry as reflected in the APRA data I referred to, it is critical to ensure that SMSF auditors are preparing high-quality audits and that any rogue elements of the sector are weeded out through appropriate enforcement action. Streamlining and strengthening superannuation are important matters for this government and feature strongly as part of our broader Stronger Super reform agenda.

There are several benefits associated with these bills. In the time available to me, I have sought to highlight some of them. It is evident that many working Australians will receive a tangible benefit from the measures being implemented by the passage of these bills. These actions are also a genuine reminder of the government's continued commitment to policy delivery and achieving its vision for the future of Australia in this regard. These bills are also another strong example of the government listening to the needs of the superannuation industry and responding to important policy issues rather than peddling untruths and seeking to alarm Australians about their superannuation savings, as some of those opposite have become accustomed to.

The superannuation framework under this Labor government has enabled Australia to amass a national savings pool in excess of $1.4 trillion, with estimates that this will grow to over $6 trillion by 2037. At a time when we all understand that we have an ageing population and the need to boost our national savings now, it is imperative for the reforms contained in bills such as these to be implemented in full. I urge all members to support these important reforms.

Deborah O'Neill (Robertson, Australian Labor Party) Share this | Link to this | Hansard source

Before the debate is resumed on the Superannuation Laws Amendment (Capital Gains Tax Relief and Other Efficiency Measures) Bill 2012, I remind the House that it has been agreed that a general debate be allowed covering this bill and the Superannuation Auditor Registration Imposition Bill 2012.

Scott Buchholz (Wright, Liberal Party) Share this | Link to this | Hansard source

I rise to speak on the Superannuation Laws Amendment (Capital Gains Tax Relief and Other Efficiency Measures) Bill 2012 and the Superannuation Auditor Registration Imposition Bill 2012, which are currently before the House. The former bill provides capital gains tax relief for the merger of superannuation funds; introduces a new registration regime for auditors and self-managed superannuation funds; expands reporting obligations for superannuation providers; and introduces new information exchange provisions for superannuation, particularly regarding the use of tax file numbers. The Superannuation Auditor Registration Imposition Bill 2012 establishes the framework for a new registration regime for SMSF auditors.

As I am sure many members of this House will be aware, self-managed superannuation funds are the largest sector in the superannuation industry, worth $400 billion. Members of these funds are advised by a range of experts, including lawyers, financial planners and accountants. The 11,000 or so SMSF auditors play a vital role in maintaining the integrity of a major sector of the superannuation system.

I cannot emphasise enough how important it is to those on this side of the House to ensure that this legislation is spot on the mark. The many people in my electorate who will be affected by this legislation will be bitterly disappointed. There are numerous self-funded retirees in my electorate of Wright and these additional changes to their superannuation make it harder and costlier for them to manage their retirement and thereby reduce the burden on the public purse. This is simply another demonstration that this Labor government has no economic strategy and will always put its own political survival ahead of the national interest. I cannot support imposing more red tape—this bill is a classic example of that.

This legislation is another grab which will affect the people who can least afford it. I do not have a self-managed super fund but a number of people in my electorate do. It disheartens me when they bring their statements to my office. The value of their funds is rapidly deteriorating. Early in 2007, the Labor government promised one in, one out, where every new regulation would be matched by repealing another piece of legislation or regulation. Latest figures show that since 2008 the Labor Party has introduced 18,089 new regulations and repealed 86—so 18,000 in and 86 out—an average of 11 new regulations added every single day since this government has come to power.

The first part of this bill looks at capital gains tax and how it affects those who choose to merge their funds from one to another. Let me state for the record that no problem has been identified that will be solved by these new requirements. It will merely make it more costly for Australians who wish to manage their own super fund to do so.

It is well known that the coalition supports Australians who want to look after their own retirement. However this Labor government just looks on superannuation— particularly for those who manage their own super fund—as a source of tax revenue. There is a constant battle to fiddle the books, for Labor to get their hands into the pockets of mums and dads and into the funds of businesses in order to hang onto some type of political credibility and a wafer-thin surplus.

As many in this House will know, capital gains tax can be a barrier to the merging of superannuation funds. This is because whenever superannuation funds merge this will typically trigger a capital gains tax event, which leads to neither capital gains nor losses being applied to assets being transferred. When a merger takes place and the assets have been transferred, the merged fund is typically wound up. However, when the merged fund comes to an end, any previous capital or revenue losses that exist at that time will be forgone. The coalition supports that particular measure.

Due to the prevailing economic and financial market conditions in late 2008, a temporary taxation relief measure was passed in the form of 'loss relief' and 'asset rollover' to assist the superannuation industry and, through the industry, relevant fund members. However, the relief provided was limited to 1 October 2011.

At the time, those on this side of the House supported the tax relief for merging super funds as a sensible measure to ensure otherwise sensible mergers of superannuation funds were not prevented based on taxation considerations. That is because the coalition supports Australians who want to look after their own retirement. We will always support those Australians who want to do more to prepare for their own retirement.

This current bill is again, temporary; this time for mergers that occurs on or after 1 October 2011 and before 2 July 2017—and it has been made clear that that the coalition support capital gains relief for merging superannuation funds.

The next part of the bill introduces new registration regimes for auditors and self-managed superannuation funds. The recent super system review recommended that the Australian Securities and Investment Commission be appointed as the registration body for self-managed super funds approved auditors. The review found that not all approved auditors are subject to the same minimum competency standards nor are they subject to the same enforcement actions.

As some background information, the practical experience that regulation will require at least 300 hours in auditing in the self-managed super funds in three years, immediately before applying for registration with the Australian Security and Investment Commission. An approved self-managed superannuation fund auditor will also need to undertake at least 120 hours of continuing professional development training every three years. This training must include 30 hours of training about superannuation, of which eight hours of training is SMSF auditing.

There are many other facts that I could add here, but I feel it is important to voice issues currently in this bill. Since 2008 Labor has added 18,089 regulations to the books. Back in 2007, the Labor government had promised that it would make no changes to superannuation laws—"not one jot, not one tittle". That was the quote from back in 2007 that there would be no changes. However, that promise has been broken now on nine occasions so far, generating a total $7.8 billion in additional revenue. So here we have a government saying one thing and doing another. The Achilles heel of this government will always be the Prime Minister, four days before the election, standing and saying that 'there will be no carbon tax under a government I lead.' And, of course, there were the Treasurer's comments that it is hysterical that somehow we are moving towards a carbon tax. This is just another piece of legislation where the government have said one thing and done another.

These changes are undermining the Australian people's confidence in the superannuation system, lowering the of contributions and consequently the level of savings available in their retirement. Voluntary superannuation contributions are down significantly in the context of a challenging market environment. It must be disheartening for people to receive their superannuation statements and see on those self-managed super funds that the value of those assets—through no fault of the own, but through world market pressures. It would be an enormous burden on families and retirees as they sit there and work out how are they going to survive in retirement and have this additional burden of knowing that there are additional costs that this government intend to apply to their savings. The last thing we need is more Labor taxes on voluntary savings making a bad situation even worse.

This bill also aims to expand the existing reporting obligations for superannuation providers. And yet again, we have a government doing everything it can to try and prevent the inevitable failure. A superannuation provider is currently only required to report about individual accounts, if they have received contributions throughout the year, and either the superannuation interest is held at the end of the period or the member received a benefit during the period. Effectively, no statement is required for inactive superannuation accounts. However, under the revised reporting obligations funds will be required to provide statements for all members, both active and inactive. This is to support the implementation of the Stronger Super package, in particular the measures designed to facilitate consolidation of superannuation funds and accounts.

Thankfully, I can report back to my constituents in Wright that the Coalition Deregulation Taskforce will continue to consult businesses and community organisations around the country looking to cut red-tape. The coalition has a clear road map for real deregulation by cutting $1 billion worth of red-tape out of the system. This is headed up by our Senator Arthur Sinodinos. He has been tasked with chopping out $1 billion worth of red tape—and I suggest that that task will not be too hard.

The last part of this bill amends the Superannuation Industry Supervision Act 1993 and the Retirement Savings Account Act 1997 to improve the linking of tax file numbers to superannuation accounts thereby, the government claims, making accounts less likely to become inactive. The changes are another example of the red tape that is so very typical of this Labor government. It is well known to those on this side of the House that Labor has a terrible track record when it comes to decreasing red tape. Red tape does nothing to help the Australian people achieve a self-funded retirement.

In conclusion, it is obvious to those on this side of the House that every time Labor increases taxes on Australian super savers it reduces the incentive for people to do the right thing by saving for and achieving a self-funded retirement. Labor have an addiction to wasteful spending and instead of standing up for Australians doing the right thing by saving for their retirement, this government is hard at work making sure that money goes down the drain. This is a government who just do not know how to manage money and how to live within its means, which is why it has to keep making adjustments to its fiscal policies.

We need a government that will encourage mums and dads, students and young working class Australians to save so they can enjoy a comfortable retirement. Importantly, we need a government that spends less and lives within its means, and therefore can tax less, and that is focused on growing our productivity and our economy more strongly. Stronger growth would not only increase our prosperity; it would also improve superannuation returns and would lead to increased government revenue without the need for all these new and increased Labor Party taxes.

We will be moving an amendment in relation to schedule 2, and I commend that amendment to the House.

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

I welcome the opportunity to speak on the Superannuation Laws Amendment (Capital Gains Tax Relief and Other Efficiency Measures) Bill 2012 and the Superannuation Auditor Registration Imposition Bill 2012. The coalition takes the issue of superannuation very seriously. It is vital for the retirement of countless millions of Australians that we have a superannuation industry that can meet the needs of an ageing population. We see investment returns challenged by a range of factors such as the global financial crisis and falling profits for a range of companies, so in recent time superannuation returns have been challenged but it is well known that you cannot look at the issue of superannuation returns over the short term. Superannuation is a lifelong investment, and if we can encourage young people to put more money into super at a young age, we can certainly ensure that Australians in their retirement years will have a much higher standard of living.

Unfortunately it is very difficult to get that message through to young people at the age of 18 or 20 or 25 or whatever—retirement at the age of 65 seems a long way off. I think one of the challenges that we as legislators have, and the industry itself has, is to communicate to young people the benefits of investment in superannuation and the importance of investing at a young age. The dollar that is put in at an early stage in a worker's life yields a much higher return on retirement than dollars put in later in a person's life. The impact of compounding is immense. One of the key issues in ensuring that people have a comfortable retirement is that the dollars be put in as early as possible so that when the person comes to retire their superannuation balance is such that they are able to have the sort of retirement they want and expect.

I turn to the legislation. Schedule 1 to the Superannuation Laws Amendment (Capital Gains Tax Relief and Other Efficiency Measures) Bill 2012 reinstates the temporary loss relief and asset rollover in division 310 of the Income Tax Assessment Act 1997, with the following modifications: firstly, there will be an optimal asset rollover for capital gains and revenue gains; secondly, losses that are transferred to the receiving entity will be treated as having been made in the income year that they were transferred; and, thirdly, self-managed superannuation funds will be excluded.

Point 1.2 states:

The loss relief and asset-roll-over removes income tax impediments to mergers between complying superannuation funds by permitting the roll-over of both revenue gains or losses and capital gains or losses. This loss relief will be available for complying superannuation funds (other than self-managed … funds) and approved deposits funds … that merge with a complying superannuation fund with five or more members.

Point 1.3 states:

All references in this chapter are to the ITAA 1997 unless otherwise specified.

The context of these amendments is very important, because the capital gains tax is the primary code for calculating capital gains or losses of complying superannuation funds. There are certain gains and losses that are treated on the revenue account, such as those from a debenture stock or bond with regard to the relevant section here, which is section 295-85. The explanatory memorandum also notes:

The transfer of assets from one superannuation fund to another, under a merger between the two funds, will typically trigger CGT event A1 (about disposals of a CGT asset—section 104-10 of the ITAA 1997) or may trigger CGT event E2 (about transferring a CGT asset to a trust—section 104-60 of the ITAA 1997). Therefore, the asset transfer will lead to the realisation of capital gains and/or capital losses for the transferring fund. Following this asset transfer and the transfer of members’ accounts to the receiving fund, the transferring fund will typically be wound up.

I note that the member for Throsby is in the chamber and is very keen to contribute in this debate. I would say that I reaffirm the coalition's belief that superannuation is a very important vehicle that should be supported. I note the fact that the coalition proposes some amendments to this legislation, and I certainly look forward to further contributions from members in this House in the ongoing debate.

Stephen Jones (Throsby, Australian Labor Party) Share this | Link to this | Hansard source

I start by thanking the member for Cowper for both his contribution and his cooperation in this debate. The Stronger Super reforms introduced by this government are about improving the adequacy, the equity and the transparency of Australia's superannuation systems. These reforms underpin one of the most important Labor reforms, the introduction of our system of compulsory superannuation savings. This package of bills before the House today—the Superannuation Laws Amendment (Capital Gains Tax Relief and Other Efficiency Measures) Bill 2012 and the Superannuation Auditor Registration Imposition Bill 2012—is part of the Stronger Super reform process, and these new measures will further strengthen Australia's superannuation framework that has so well served working Australians in their retirement years. The government has, indeed, attempted to extend our early and revolutionary introduction of occupational superannuation during the period of the Hawke and Keating governments by introducing legislation to shift the compulsory contribution from nine to 12 per cent over a staggered period to ensure that future generations of Australians will have a more adequate retirement income.

Australia has high levels of national savings and even higher levels of national investment—that is to say, there is a gap between our level of savings and our level of investment. Compulsory superannuation, quite simply, is an important mechanism for closing that gap. Australian superannuation savings are currently worth around $1.4 trillion and are expected to reach $6 trillion by June 2035. For that reason, it is important that governance of superannuation is effective and is of the highest prudential standard.

I now turn to expand on some of the measures within these bills. The first measure, as set out in schedule 1, will remove income tax impediments to superannuation fund mergers by providing loss relief and asset rollover of both revenue gains or losses and capital gains or losses. The rationale for this amendment flows from the government's Stronger Super reforms, which have, quite simply, put pressure on superannuation funds to improve their competitiveness or reassess their viability in the absence of merging with another entity.

What we know in this area of investment is that, most often, bigger is better. The extinguishment of tax losses can be an impediment to fund mergers as trustees of superannuation funds are required to consider the adverse impacts in relation to tax on members' benefits of any fund merger. So this measure will apply to fund mergers that occurred on or after 1 October 2011 and before 2 July 2017, creating a window and an incentive within that window for funds to consider their size and consider the opportunities of merging with other funds with similar objectives.

Schedule 2 is about establishing auditor registration for self-managed superannuation funds, something that I and the member for Cunningham have a deep interest in because of the high number of constituents within our electorates who have lost significant amounts of money through the self-managed superannuation fund sector. I will have something to say about that.

Schedule 2 of the bill will establish an auditor registration for self-managed superannuation funds. Auditors play a critical role in the SMSF sector and, consequently, it is necessary that SMSF auditors have a high standard of competency. Many in this place know the high personal and financial cost that occurs when not only auditors but also regulators and corporate officers fail in their duty to investors, fail to pick up malfeasance, fail to pick up fraud and fail to pick up something that is within their statutory remit.

Unfortunately, as I said, the member for Cunningham and I know this situation all too well, with a large number of constituents in our electorates suffering enormous loss from the collapse of Trio Capital in 2009. This was a fraud committed on a grand scale, the biggest superannuation fraud in Australia's history. Around $176 million in members' funds were stolen through the fraud, money that belonged to hardworking Australians. Devastatingly, nearly half of these investors had directly invested in Trio through self-managed superannuation funds.

In the aftermath of the Trio disaster, considerable attention has been paid to the role of various regulatory gatekeepers in this fraud. Understandably for the Trio victims, the search for somebody to blame for this fraud is flavoured with strong emotion. If you put yourself in their position you would feel exactly the same. Every devastated investor who I have spoken to about the Trio collapse feels they took appropriate steps and, indeed, did everything successive governments have encouraged them to do—and that was to take control of their financial security in retirement by ensuring that they had a superannuation fund and to do that in a way that ensured that they did not take undue financial risks. Investors felt that they were acting responsibly and that Australia's strong financial system would ensure that they could rely on its regulatory systems. Fraud, by its very nature, is designed to get around those regulatory arrangements. It is designed to conceal and confuse.

KPMG and WHK, the auditors of Trio Capital, have come under considerable scrutiny since each year for six years they signed off on the financial statements of Trio and Astarra as being true and correct—and, quite plainly, this was not the case. These matters have been examined by the report of the Parliamentary Joint Committee on Corporations and Financial Services into the Trio collapse. WHK was the auditor at the time that Trio collapsed and gave evidence to the parliamentary committee that auditors take a risk based approach which is not designed to detect fraud.

This submission confirmed evidence presented to the committee in a submission by KPMG.

In its submission, KPMG outlined what it describes as the expectation gap, which is the difference between the public's expectation of the work of an auditor and what that work may disclose, and the auditor's own understanding of the work that is required to be done and reported upon in fulfilment of their duties. There is no doubt that, with regard to Trio, there is a clear gap between what investors perceived the role of auditors to be and the actual audit work that was done. The parliamentary report identified some key areas for further reform for ASIC to consider, including for more detail to be provided in compliance plans, for membership of compliance committees and related requirements.

It is important to note here that both the role of the Trio auditors and their evidence to the parliamentary committee was not of a high standard. Many issues remain with regard to the Trio collapse and the role of the auditors. Of great concern is that most self-managed superannuation fund investors appear to have had no idea that they were assuming the role of the trustee of their investment and thereby accepting a lower standard of prudential regulation.

Unravelling the Trio disaster and the level of responsibility, accountability and blame for each participant and gatekeeper in the collapse of Trio is a complex task. In the meantime the SMSF auditor registration measures in the bill before the House today will raise the standard of SMSF auditor competency and ensure there is a minimum standard that applies across the entire sector. SMSF auditor registration will ensure that auditors of self-managed superannuation funds have a minimum standard of competency and knowledge of relevant laws and are able to detect and report contraventions by SMSF trustees. ASIC will be the registration body for SMSF auditors and will set competency standards that apply penalties to non-compliant auditors. The ATO will also have powers to monitor auditor compliance and be able to refer non-compliant auditors to ASIC for enforcement action. Reforms to our system of financial regulation are a series of small steps, like this one.

These reforms to the auditing arrangements are very important. A 2009 compliance audit by the Australian Taxation Office discovered that 29 per cent of the auditors of self-managed superannuation funds were the SMSF's accountant and that, in relation to 28 per cent of auditors, there appeared to have been some evidence of a relationship or a conflict of interest that might impact the auditor's ability to be independent, as would be required of an auditor of any corporation or any other fund in this country. For this reason alone and based on the experience that I have had in dealing with the victims of the Trio fraud, I commend this schedule of the bill to the House.

Amendments in schedule 3 of the bill will allow the ATO to display more comprehensive superannuation information to individuals and will facilitate the consolidation of inactive accounts with a low balance. They will also support the increased concessional contributions caps for members over 50 whose interests or accounts are valued at less than $500,000 from 1 July 2014.

I turn to schedule 4. As part of the government's Strong Super package of reforms, a number of measures were announced to improve the efficiency of the superannuation system. These measures included the introduction of mandatory superannuation data and payment regulations and standards for eligible superannuation entities, RSA providers and employers, which were legislated in June 2012. It has been estimated that the Australian superannuation industry processes more than 100 million transactions annually. The potential gains to the system from improved efficiency in contribution management are significant.

This is one of those classic areas where more regulation leads to greater corporate efficiency—because when you are dealing with 100 million transactions annually, if you do not have standard protocols for the transmission, storage and reporting of that critical data, then a hell of a lot of extra work, duplication and inefficiency creeps into the system. In this particular area inefficiency means a cost to an employee or a member of a superannuation fund. So these measures are critically important. They will help to reduce the administration costs for the funds themselves but also, critically, they will help to ensure that we have a more efficient, effective and transparent system of superannuation administration in this country.

With around $1.4 trillion now invested in superannuation there is a strong public policy interest in having a safe, efficient and competitive superannuation sector to maximise the retirement incomes of all Australians. This Labor government, I am very proud to say, has focused on delivering superannuation and pension reforms for the long term. Australia's economy is growing and we have strong fundamentals such as low unemployment, contained inflation, low net debt and a record investment pipeline. It is critical that the superannuation system is designed to work for all members. It must work for those who take an active interest in their superannuation as well as for the majority of superannuation funds members who do not take a day-to-day interest.

As the collapse of Trio Capital amply demonstrates, we as parliamentarians have a duty to ensure that the laws that set out our system of financial regulation are robust, continually refined and keep pace with the increasingly sophisticated means of perpetuating fraud.

I commend this package of important bills to the House.

Natasha Griggs (Solomon, Country Liberal Party) Share this | Link to this | Hansard source

I rise to speak on the Superannuation Laws Amendment (Capital Gains Tax Relief and Other Efficiency Measures) Bill 2012 and the Superannuation Auditor Registration Imposition Bill 2012. Along with the rest of the coalition, I am an avid advocate for reducing the burden of government on Australians. During the Howard years the burden of capital gains tax on individuals was reduced significantly—by over 50 per cent. This tax still places pressure on aspirational Territorians. In 2009-10, individuals in the Territory paid over $72 billion in capital gains tax.

The coalition supports reducing the burden of this tax on individuals and companies. The capital gains tax can be a large hurdle to the merging of superannuation funds. It can restrict mergers between funds even when, in the long run, it could be of benefit to members. Typically when funds merge we see either capital gains or losses in the transfer of assets. The merged fund is generally discontinued once the assets are transferred, and at this point any previous revenue and capital losses are forgone. This can be a disadvantage to the fund as capital losses can be used as offsets for present and future capital gains tax liabilities and revenue losses can be used as offsets against current year income.

I support schedule 1 as it will allow for the rollover of both revenue and capital losses. However, this is only relief legislation for superannuation funds during the prevailing economic times. This bill will cover all mergers that occur between 1 October 2011 to 2 July 2017. This relief legislation only brings further uncertainty to businesses and individuals. No-one is sure what will happen after 2 July 2017.

Schedule 2 places a higher burden on my constituents and other aspirational Australians. Self-funded retirees are some of the hardest hit by the Gillard Labor government's carbon tax through increasing grocery, electricity and petrol costs. The residents of Darwin and Palmerston already face huge costs and heightened cost-of-living pressures. By introducing the new registration regime for auditors of self-managed superannuation funds, self-managed retirees will have to deal with more red tape.

This bill will allow the Australian Securities and Investments Commission to become the registration body for the auditors of self-managed superannuation funds. ASIC will be given responsibility under this schedule to determine the eligibility of auditors, the competency standards they must meet and how this would be implemented. As my colleagues have raised before, we have concerns about this bill, which will give auditors very little time to meet new industry standards. It is typical of those opposite: policy on the run with no proper consultation period.

Registration of auditors will begin on 31 January 2013, and all auditors will need to be accredited by 1 July 2013 so that they can continue practising. Is this realistic? How much extra pressure will this place on businesses? It is typical of this government, which, as we know, is no friend of business. These changes will increase the burden on businesses if this bill is passed in its current form. The regulation to this bill states that the maximum fee an auditor can be charged for accreditation is around $1,000. This is a further cost to be borne by business at a time when many businesses are struggling. As the minister has stated, applicants will have to pay a $100 initial registration fee for an online application, a $100 fee to take a competency exam and an annual fee of around $50 for a statement from ASIC, which will be subject to an increase of approximately $14 a year.

This is just for starters. This is an additional cost to businesses, which will have a significant impact. We understand that the fees from this new scheme are expected to collect about $1 million over a five-year period from, say, 2011-12 to 2015-16. At the same time the implementation costs are expected to be around $29.7 million. So there is a $28 million gap there.

So I ask: where is the money coming from? Just last week we saw the Treasurer handing down a MYEFO built on uncertainty and instability. We see this government spending and promising money everywhere, but I ask you: where is this money coming from? In just four months we have seen the Gillard Labor government cut the size of their forecasted surplus by a third. Will we ever see a surplus from Labor? We know that Labor has a terrible track record. Just ask my colleague the member for Longman, who has never seen a Labor surplus in his lifetime. This Labor government also implemented a mining tax—a mining tax that has raised absolutely nothing in its first three months of existence. Maybe it never will. Now, I do not know about you, Deputy Speaker Rishworth, but I have never heard of a tax that does not raise money. But, in typical Labor fashion, the mining tax is just another example of economic mismanagement at its worst. We see them spending recklessly money that they just do not have.

Net interest repayments for this financial year are currently at around $20 million per day. Yes, $20 million per day, and that only covers the costed programs. We know that the Gillard Labor government has a $120 billion black hole of unfunded promises—$10.5 billion a year for the National Disability Insurance Scheme, once fully operational from 2018-19; $6.5 billion a year for the Gonski review; and $1.4 billion for an increased refugee intake to 20,000 over the forward estimates. With so many unfunded promises, how can they afford to implement the auditor registration regime as well? This is not the government's money they are spending, but that of aspirational Australians.

As a timely reminder to those opposite, I wish to quote the great Margaret Thatcher, an incredible woman who understood how important it was to reduce the burden government placed on the lives of individuals and businesses. Baroness Thatcher once said, 'There is no such thing as public money; there is only taxpayers' money.' I could not have said it better myself. Those opposite are spending taxpayers' money at unprecedented levels. You may be surprised to know that the spending of the Gillard Labor government is $90 billion more a year than the spending in the last year of the Howard government. Governments must live within their means. The government is putting everything on a giant credit card, and we all know Labor cannot be trusted with credit cards.

If the Treasurer wants advice on how to balance budgets, he needs to look no further than my electorate. Families in Darwin and Palmerston are masters of budget balancing. They have to be. The people of Solomon understand what it means to balance a budget. Struggling to manage a budget is part of their everyday lives—balancing school fees, mortgage repayments, grocery bills, electricity bills, rates and phone bills. These costs are only further compounded by the Gillard Labor government's carbon tax on everything. In the 2011-12 financial year Darwin experienced the largest housing price increases in the country, averaging 12.3 per cent. Darwin and Palmerston have the third highest median house prices in Australia, after Sydney and Melbourne, and the highest median weekly rent costs for a three-bedroom home, $542 a week, compared to the next closet city, Canberra, with a median price of $448 per week. This is absolutely outrageous. But this is indicative of a Territory Labor government, recently voted out after failing Territorians for 11 years. Territorians had had enough and voted them out. If the people of Darwin and Palmerston are so capable at managing a budget, why isn't the Treasurer?

I go back to the Superannuation Laws Amendment (Capital Gains Tax Relief and Other Efficiency Measures) Bill 2012. We are deeply concerned that this bill will just increase the red tape burden on those Australians who wish to manage their own superannuation. Under Labor, the only certainty for Australians is more taxes, more debt and more pain. It is quite obvious that the Gillard Labor government have completely lost their way, and their only answer is to try and reignite a class war. As I have said many times in this place, small business is the backbone of the Northern Territory, and this government is punishing those people for nothing more than their own political gain, punishing these individuals for being aspirational and daring to dream.

In MYEFO last week we saw the Treasurer confirm that $390 million would be spent by the ATO to crack down on small businesses. Small businesses are being forced to pay as the Gillard Labor government look to every possible avenue to fund their spending addiction. We know that Labor is no friend of small business. Labor is no friend of the aspirational Australian.

I have some surprising statistics for you. Since Labor came to office in 2007, we have seen 18,089 new regulations introduced—that is 11 regulations a day—and only 86 have been repealed. This is a far cry from the election promise made in 2007 of 'one in, one out', where new regulations would only be brought in if they were matched by one that was repealed. So someone cannot count, because from my accounting there are about 18,000 extra regulations that need to be repealed. It is no wonder red tape is strangling individuals and business. The Gillard Labor government is built around policy on the run. There is a complete lack of understanding and appreciation for small business.

I ask you, Deputy Speaker, how many of the cabinet ministers have run a business? I suspect the number is very low, if any at all. This is in strong contrast to the coalition. We understand small business, we are the party of small business and we know that small business is the engine room of economic growth in Australia. We have a plan. Under an Abbott-led government the coalition will cut $1 billion worth of red tape. The coalition has never supported unnecessary red tape. The coalition does not support unnecessary red tape. Along with my colleagues I support Australians choosing whether or not they save for their own retirement. We will be putting forward an amendment to this bill, as we are opposed to the red tape inherent in the new audit regime for self-managed super funds.

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

I am very pleased to rise to speak on the Superannuation Laws Amendment (Capital Gains Tax Relief and Other Efficiency Measures) Bill 2012. I want to focus in particular on one of the principal measures in this bill, which is to provide capital gains and other tax relief for merging superannuation funds. The policy rationale for that, stated in the explanatory memorandum, is to encourage the merger of small superannuation funds and in turn deliver benefits to members through economies of scale.

In the time available to me today I want to make three points. Firstly, I want to make the point that capital gains tax relief for the merging of superannuation funds is a reasonable idea, as far as it goes. Secondly, I want to spend a moment speaking about the serious public policy problem which this bill is designed to address—namely, that there is a long tail of small superannuation funds. Thirdly, I want to make the point that we need to have a more comprehensive look at the issue of the long tail of small funds and ask whether the measures in this bill go far enough.

I turn firstly to the proposition that the measure to give tax relief contained in this bill is a sensible idea as far as it goes. I remind the House that superannuation is designed to be a tax advantaged vehicle for the accumulation of retirement savings. The ultimate policy intention is to allow as many Australians as possible to build up savings and hence provide, wholly or partly, for themselves in retirement rather than relying on the old-age pension. This year the old-age pension will comprise around $37 billion of Commonwealth expenditure, which is around 10 per cent of the entire Commonwealth government expenditure. So, clearly, the policy prize if we can reduce the reliance on the old-age pension is a very significant one.

The problem which this bill is specifically designed to address is that we have too many small, subscale, superannuation funds. Accordingly, anything which would act as an impediment to funds merging and therefore allowing average fund size to increase needs careful consideration. A factor which presently acts as an impediment today is that, if superannuation funds merge, there are adverse tax consequences for the members of the fund. First of all, the transfer of assets which typically occurs as part of a merger is a capital gains tax event. In the attractive jargon of the Income Tax Assessment Act, it might be a CGT event A1, the disposal of a capital gains tax asset, or it might be a CGT event E2, the transfer of a capital gains tax asset to a trust. In either event, it triggers an obligation to pay capital gains tax. Secondly, typically in such a transaction, one of the existing funds will be wound up. That means that any existing tax losses held within that fund can no longer be used. That, additionally, is a factor which negatively impacts on the net value of the assets in the fund and in turn on the value of the balances held by members.

Given that the very purpose of superannuation is to accumulate assets in a concessional tax environment, it is understandable that trustees would be wary of proceeding with a merger given the current tax consequences, where it is likely to reduce the value of members' balances. Accordingly, a change to the law which removes this impediment, this blocker, to mergers of superannuation funds, makes sense in principle. That is certainly the view of this side of the House.

Let me turn secondly to the underlying policy problem which this measure is designed to address. In the words of the explanatory memorandum, the intention is to:

… put pressure on superannuation funds to improve their competitiveness or reassess their viability in the absence of merging with another entity.

And it is to encourage:

… increased size or scale of superannuation funds to enable funds to provide a range of benefits to members …

Let's be a bit clearer about what the problem is here: we have a long tail of small superannuation funds. We should also be clear that small funds are not of themselves a problem. It is certainly possible that a small fund might have superior investment skills such that it generates above normal returns and that those excess returns more than compensate for any extra costs which result from its smaller size. But, when the size and composition of a superannuation fund has been determined not on the basis of rational economic considerations but on quite different considerations, there is every possibility of a small fund delivering inadequate returns.

Our present superannuation system comprises many different funds, some small and some large. The particular basis on which the money has been divided up—and, hence, the basis on which an employee has his or her retirement savings allocated to any one fund—is driven quite heavily by the architecture of the union movement. This is a very important public policy question because the superannuation system has grown very large, with some $1.4 trillion of funds under management. Largely thanks to compulsory super contributions, in 2011-12, some $90 billion flowed into the sector. Of that, nearly two-thirds went into one of two kinds of funds: industry funds or public sector funds. Funds of this kind generally use the 'equal representation' model, with half of the directors appointed by a union and half by an employer association.

In the APRA statistics, for the 2010-11 financial year there were 76 funds listed as 'industry' or 'public sector'. An analysis of the annual reports of these funds shows that in 2010-11 there were a total of 575 directors on their boards, of whom 180 were appointed by unions. These funds had a total of $370 billion under management as at 30 June 2011, according to the APRA statistics, and the biggest 10 funds had around 63 per cent of this total. This leaves a long tail of much smaller funds. In fact, of the 76 funds, 57 are less than $5 billion in size, and at least 20 have assets of less than $1 billion.

Let me mention some examples. The Australian Meat Industry Superannuation Trust had net assets of $990 million as at 30 June 2011. The Health Industry Plan had net assets of $612 million. AUST(Q), otherwise known as the Allied Unions Superannuation Trust (Queensland), had net assets of $193 million. The Transport Industry Superannuation Fund had net assets of $84 million. I make no criticism of the specific managements of the funds I have mentioned, but I do raise the question of whether it best serves the interests of members to have a large number of quite small funds. That of course is the very question which the measures in this legislation are designed to address. I think we can see that there is an underlying public policy problem.

The real question, though, is whether the measures in this legislation will go far enough, and that is the third point I want to come to. How likely is it that desirable mergers will occur just because the tax impediments to such mergers are reduced, when we have the structural features of our superannuation system which I have described? The recent failure of the merger between Vision Super and Equipsuper in Victoria is not an encouraging precedent. Vision Super has four directors appointed by the Australian Services Union. The merged entity was supposed to have elected directors. It turned out that a member of the Equipsuper fund—somebody who happened to be a senior manager at a power company—chose to seek election as a board member of the merged super fund. This made the Australian Services Union very cross. In an email to Australian Services Union members, the state secretary of the union, Brian Parkinson, had this to say:

As expected, employers are seeking election to workers' positions. Indeed, one such individual … has exploited his senior management role to frustrate the election chances of ASU candidates … Management will pull out all the stops to see one of their own elected at the expense of workers.

At the time of sending this email, Mr Parkinson was also a director of Vision Super. He had duties to the members of that fund, and the transaction was conceived as being in the interests of those members. Yet, pretty clearly, when Mr Parkinson sent this email he was not giving much thought to the interests of members of Vision Super; what he was concerned about was the interests of the Australian Services Union.

We need to look very closely at whether the measures in this legislation will do much to assist the position when relatively small superannuation funds are very closely aligned with unions. It is quite easy to see how a governance problem in a union could infect an associated superannuation fund. We have seen such an example quite recently with the former Health Services Union boss Michael Williamson, until recently a union appointed director of First State Super, a fund with some $30 billion under management. Earlier this year, the chairman of First State Super complained that he had no power to remove Mr Williamson as a trustee of that fund, despite the serious allegations, at that point, which had been made about Mr Williamson's conduct. Of course, since that point he has been charged by the New South Wales police.

An equally troubling example of this phenomenon is a $30 million investment in the building company Austcorp by the Meat Industry Employees Superannuation Fund, almost all of which was lost following Austcorp's collapse in 2009. The Australian has reported that Mr Wally Curran, a long-time secretary of the Meatworkers Union and a long-serving director on the board of the fund, was paid significant consultancy fees by Austcorp. At the very least, this raises serious questions about whether Mr Curran had a conflict of interest and whether he was acting in the best interests of members of the fund. That $30 million, by the way, was a material proportion of the entire balance of the assets of the Meat Industry Employees Superannuation Fund.

Or we could consider the position of TWUSUPER, a fund with $2.6 billion under management and 130,000 members, with four directors appointed by the Transport Workers Union. The four directors appointed are the Transport Workers Union's federal secretary, Tony Sheldon, and three state secretaries: Wayne Forno, Wayne Mader and Jim McGiveron. Last year the Transport Workers Union vigorously attacked changes proposed by the management of Qantas to the operation of that company, changes that management said would improve the company's financial performance. How do the directors of TWUSUPER, who are also union officials, think about equity investments in Qantas or other companies in the transport sector? Members of TWUSUPER have a right to expect that the sole consideration exercising the minds of directors is how to maximise the financial returns generated by the fund. Indeed, under the sole purpose test in the Superannuation Industry (Supervision) Act, that is the duty of directors of that superannuation fund.

So there is clearly a structural problem in the superannuation sector, particularly in relation to industry and public sector funds, where there is a long tail of small funds. As some of the instances I have cited highlight, this creates the potential for inadequate standards of governance, particularly amongst that long tail of smaller funds, which are not subject to the same degree of detailed public scrutiny as larger funds tend to be. The question I also want to raise for consideration by the House this afternoon is whether the well-intentioned measure in the legislation before the House today goes far enough to encourage the consolidation which it says is a desirable objective, when you consider some of the entrenched interests of directors of funds. I think the email that I cited from ASU state secretary Brian Parkinson is extremely relevant in that regard.

Let me conclude by noting that the measures in this bill are intended to assist in facilitating the mergers of superannuation funds by offering capital gains and other tax relief for such mergers and in turn to address the problem, which clearly exists, of a long tail of subscale funds. I hasten to add that the mere fact that a fund is small does not of itself indicate a problem, but we have seen that, where there are small funds, particularly ones closely associated with unions, that creates a culture in which governance problems appear to be more likely to materialise. The only way to get to grips with this issue is to seriously address the governance of superannuation funds and in particular the recommendations of the Cooper review in relation to ending the current form of the equal representation model. It is a matter for regret that the Minister for Employment and Workplace Relations and Minister for Financial Services and Superannuation and former National Secretary of the Australian Workers Union has done nothing about that.

Debate adjourned