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

The Superannuation Legislation Amendment (Reform of Self-Managed Superannuation Funds Supervisory Levy Arrangements) Bill 2013—doesn't that just roll off the tongue?—is before the House as a MYEFO, Mid-year Economic and Fiscal Outlook, budget measure that the government announced in October last year.

The bill seeks to provide for an increase in the levy payable by a trustee of a self-managed superannuation fund from $191 to $259 commencing from the 2013-14 financial year. It also brings forward the liability to pay the levy during the income year instead of the current requirement to pay a number of months after the end of the year, when the self-managed superannuation fund lodges its return. So the bill is about both a fee increase and a fee bring-forward. The government argued that this measure was required to ensure that the Australian Taxation Office's cost of regulating the sector was fully recovered.

The bill was referred to the Parliamentary Joint Committee on Corporations and Financial Services in order to understand the justification for this increase to the levy. The committee found that it was in fact Treasury, not the ATO, which initiated the increases and bring-forward provisions within this bill. Whilst the committee is yet to finalise and publish its report, and answers to questions taken on notice are yet to be received, current evidence suggests that the initial timing of the government's plan was driven more by its own desperate need for revenue to bolster the budget bottom line, which is fast deteriorating before our very eyes. The bill is more about a dash for cash than a considered and compelling policy measure, as was revealed by the committee's deliberations.

This government has guaranteed the Australian people on over 500 occasions that it would deliver a budget surplus in 2012-13. The Treasurer has promised a surplus on over 350 occasions since 2 May 2010. That promise was 'iron clad'. Failure was 'not an option'. The surplus would be delivered 'come hell or high water'. The finance minister has promised a surplus on 142 occasions since September 2010, saying it was 'not negotiable'. The Prime Minister has promised a surplus more than 150 times since 24 June 2010. She even got ahead of herself, claiming the surplus had already been achieved. In her address to the McKell Institute on 4 July 2012 she said: 'We saved jobs, stayed out of recession and got back to surplus.' Those statements suggested the government peaked early, but it certainly has not delivered a surplus.

On the eve of Christmas last year, the Treasurer finally admitted that it was unlikely that this government's promise of a surplus in the current financial year would be delivered. He said, 'Dramatically lower tax revenue now makes it unlikely that there will be a surplus in 2012-13.' It is an interesting observation, as the latest forecasts suggest the Commonwealth's revenue is set to grow by 7.7 per cent this financial year. The small business community, which I travel through in the area of the member for Ryan and all around the country, would just love to have revenue growth of 7.7 per cent. Alas, that is not their experience; but it is this government's experience. So the revenue growth is substantial; it is significant; but clearly it is not of the herculean proportions needed to cope with the spending binge of this government.

Even when the Treasurer will not tell the Australian people what the bottom line will be, he persists in batting back concerns about escalating debt, the trajectory of our indebtedness, the scale and size of the budget surplus and when, if ever, a Labor government will bring us back to surplus. I think it was 1989 when Labor last delivered a surplus and Mick Hucknall and Simply Red had the hit that year If you don't know me by now. How topical is that? We do know this Treasurer, we do know Labor governments and we do know that a budget surplus is probably further into the future than that hit single was in the past.

The government pays lip-service to balanced budgets but Labor has not delivered a surplus in its last 10 budgets. And with the election to be in September this year it is becoming clearer by the day that this Treasurer will never actually deliver a surplus, as we hear new announcement after new announcement, putting further pressure on the expenditure side of the Commonwealth's finances, with little sign that there are revenue measures or reductions in other areas of expenditure to cover them. I give Labor credit for one thing, and that is a perfect record—five whopping huge budget deficits out of five budgets—a record which I hope no future government will seek to emulate.

This budget measure from the government is simply a desperate act to try to plug holes in a fast deteriorating budget position. All superannuation funds are subject to a supervisory levy to fund the regulatory costs of ensuring funds comply with superannuation legislation. Separate levy arrangements apply to SMSFs and to registrable superannuation entities to recover the costs of their regulation by the ATO and Australian Prudential Regulation Authority respectively. The government claims, and the industry does not disagree, that the current SMSF supervisory levy does not fully recover the ATO's costs of regulating the sector. However, the industry would like the government to justify the quantum of this increase and also the issue relating to bringing forward the timing of its payment.

According to the government, the bill ensures that the ATO's costs of regulating the sector are fully recovered, but we are yet to receive any sufficient detail as to the basis of this cost recovery and the calibration of the fees represented by this bill. The explanatory memorandum merely asserts that the current levy does not fully recover the ATO's cost of supervision and does not provide any basis for the size of the increase. The bill also changes the law so that the levy is collected from SMSFs within the same income year for which the levy applies, with a date to be set by regulation. Currently a fee is payable a number of months after the year-end position following lodgement of the annual return.

While the government in MYEFO announced that it would increase the SMSF levy from $191 to $259, this further change impacts the timing of the payment, which results in funds having to pay a total levy of $321 in the 2013-14 year—as you have two payments because of the bring-forward to be paid in that year—and a total levy of $388 in the 2014-15 year. This is a blatant revenue grab. It reminds me that some state governments offer a 10-year motor vehicle licence, so that they suck in 10 years' worth of revenue in one year and then where is the revenue in the years that follow? This is all part of the fiscal fiction that there will somehow be a surplus this financial year. It is a blatant revenue grab and the bring-forward component simply plugs a worsening budget position.

The bill before the House amends the Superannuation (Self-Managed Superannuation Funds) Supervisory Levy Imposition Regulations 1991 to increase the threshold of the maximum levy payable by trustees of self-managed superannuation funds. This amendment will provide flexibility to increase the levy. We wonder where it will go to next. I feel the concern of the many who have self-managed superannuation funds as they express it to me: are they the next cash cow? Out of the various funds under management in the superannuation retirement income sector, the self-managed superannuation funds is the largest pool and for many in small business it is their pool where they seek to provide a retirement nest egg after years of toil—at the moment a lot of difficult toil in difficult economic circumstances. I cannot help but think that this Labor government sees that resource pool as a tantalising opportunity for a further cash grab. We watch with interest as the budget is being formulated. There has been lots of discussion about superannuation being the next cash cow to be milked to paper over this enormous budget difficulty that the government has got itself into. We wait to see. We watch with interest whether the government will seek to gouge this levy further by either escalating it with a higher ceiling or putting some other cost-recovery fee in place as it desperately looks for new taxes to pay for its worsening budget position.

This government is yet again hitting up the superannuation system to try and fix its own problems. Many remember former Prime Minister Rudd's assurance that there would be no messing with superannuation—'not a jot, not a tittle'. You can look at the references as to where that phrase comes from, but these are big fiddles that have happened in the superannuation industry. They show that that assurance provided by a Labor leader was completely empty, vacuous, and stood no chance of surviving when there is a dash for cash motivating so much of the government's decision making and policy development processes.

This levy is yet another impost in a long line of cost increases which have been incurred by our nation's superannuation system. Over $8 billion has been ripped out of super since Labor came to power in November 2007. These measures are the temporary reduction, the co-contribution matching rate, the reduction in concessional contribution tax limits, the changes to income definition for co-contribution purposes, the extending of the pause for indexation for the co-contribution threshold, and the further reductions in the co-contribution matching rate. They are haphazard changes and fee gouging. That is no way to run a superannuation system and build confidence in what is a long-term investment and commitment by those contributors and those that rely on their superannuation for their income today.

The coalition will not be opposing this bill, but we remain concerned at the government's justification for this support of this supposedly cost-recovery measure, given that there is no calibration to validate that in any of the material that has been provided to date. We are particularly vigilant in keeping a very close eye on the government as they size up the superannuation cash cow just to see how much they can milk out of it in the upcoming budget.

Shayne Neumann (Blair, Australian Labor Party) Share this | Link to this | Hansard source

I speak in support of the Superannuation Legislation Amendment (Reform of Self Managed Superannuation Funds Supervisory Levy Arrangements) Bill 2013. I hope those people listening will recall probably the penultimate paragraph of the member for Dunkley's speech, where he was bleating about and bemoaning this legislation: how bad it was and how terrible it was for the Australian economy, the Australian community and those people with superannuation. Then he said, 'But we're not going to oppose it.' What hypocrisy is that! He was bleating, bemoaning, carping, whingeing and whining, and then he said that he is not going to oppose it. I would have more respect and more regard for the member for Dunkley's views on superannuation if he were not going to oppose the $500 tax on the 24,000 low-income earners in my electorate of Blair—that is what his policy is—and if he had actually voted in favour of the increase from nine to 12 per cent in superannuation co-contribution. But, no, he has not.

Now, a bit of fact: he is going on about how this will almost impoverish people in SMSFs, but the average assets—as at 30 June 2011—in SMSFs were $963,002 in every superannuation fund. This new levy is $259 a year. I will repeat that. The average asset in these superannuation funds is getting up to close to a million dollars, and it is a levy of $259—that is what it is. It is consistent, mind you, with the Australian Prudential Regulation Authority regulated funds, which pay the superannuation supervisory levy in the same financial year it is levied. APRA regulated funds have been paying that superannuation supervisory levy in the relevant year for years. We think it is appropriate to do this. It is appropriate for a cost-recovery levy.

The other thing that the member for Dunkley was going on about was how this is some sort of massive amount of money that we are going to pull out. This is a very small amount of money across the forward estimates. The actual figures are: 2012-13 revenue, zero; 2013-14, $70 million; 2014-15, $164 million; 2015-16, $88 million. That is the gross revenue without the expenses associated with it. That is the financial impact of this particular policy. But you would think that we were putting on billions of dollars of tax and gouging it out of self-managed superannuation funds.

I have had a bit of history with this. Before I was elected, I was a businessman for 20 years—a senior partner of a law firm and managing partner in relation to that, with my then partner, Matthew Turnour. We ran a business and I had my own superannuation fund—the Neumann-Turnour superannuation fund—in relation to this, so I have a bit of history and experience in relation to this and these are very common themes. As at 30 June 2012 there were nearly 479,000 SMSFs, with 914,000 members. We have seen almost 35,000 new ones registered in 2011-12. We have, in this country, about $1.2 trillion invested in superannuation and that is going to increase to about $6.2 trillion by 2036.

We have the fourth largest privately managed superannuation funds in the world, and this government commissioned Jeremy Cooper to undertake a review on 29 May 2009—a commission now known as the Cooper review—and we responded positively to 139 of the 177 recommendations of that review. We have been reformers with respect to superannuation, from the MySuper accounts to lifting the superannuation guarantee from nine per cent to 12 per cent, which will impact and help 44,000 local workers in my electorate alone. If someone is 30 years old and on average earnings, they will have about $110,000 more in superannuation savings by the time they retire. The levy pales into insignificance compared to that sort of arrangement, which we are undertaking and is opposed by those opposite and which will result in 8.4 million Australians getting a big boost to superannuation. And the Liberal Party opposes it tooth and nail. We are lifting the capacity of people in Australia to live in security and dignity in retirement, and we think that is so important.

As the member for Dunkley accurately pointed out, the ATO is responsible for regulating this particular sector, and regulation is compliance based and on a cost-recovery basis as well. To that end, this bill increases the maximum levy payable by SMSFs for a year of income from $200 to $300 per year, effective from 2013-14, with the actual levy increasing from $191 to $259 a year from 2013-14. It will help the ATO to regulate the sector more effectively, in terms of costs, and ensure that these self-managed superannuation funds pay the full cost of this. This is prudent reform. It is another example of the government undertaking responsible economic management, and I commend the legislation to the House.

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

I am very pleased to rise to speak on the Superannuation Legislation Amendment (Reform of Self Managed Superannuation Funds Supervisory Levy Arrangements) Bill 2013. The stated purpose of this bill is to increase the cap on the levy which can be charged each year to self-managed superannuation funds. The levy is charged as part of cost-recovery arrangements under which the Australian Taxation Office incurs costs in its function of supervising the self-managed superannuation fund sector.

The premise of this bill is that the current SMSF levy does not fully recover the Australian Taxation Office's costs of supervising the sector. Indeed, that is what the explanatory memorandum says to us. There is a statement in paragraph 1.5 that says:

The current SMSF supervisory levy does not fully recover the ATO’s costs of regulating the sector.

In the time that is available to me today, I will make three points. First of all, the purpose for which this measure has been developed and the process by which this measure has been developed have been poor, and the sector which is regulated is anxious about this measure—and that anxiety has been exacerbated by the poor process. Secondly, the evidence which has been provided regarding the nature and extent of this cost shortfall raises serious questions. Thirdly, it is difficult to avoid the conclusion that this is yet another instance of a desperate grab for cash by a hopeless government which has lost control of the budgetary and fiscal process.

I start with the proposition that the process has been very poor and that, as a result, the sector which is regulated is very anxious. The Parliamentary Joint Committee on Corporations and Financial Services on which I sit held a hearing on this bill last week. We heard from a number of players in the sector, particularly the Self Managed Super Fund Professionals Association of Australia. Their evidence was very interesting. Amongst other things, they highlighted that they were uncertain as to whether the changes to collect the SMSF levy in the same year that it is levied, which is one of the measures contained in the bill, will result in changing the current method of collecting the levy through the SMSF annual tax return. I acknowledge that officials of the Australian Taxation Office later in the hearing indicated that it was not intended to change the current collection methods. That is good news. It is surprising and disappointing, however, that it took until the occurrence of this hearing for that information to be communicated to the sector which is to be regulated. It is surprising and concerning that this degree of uncertainty about a fundamental aspect of these reforms was allowed to fester in the sector that is to be regulated.

It is also noteworthy that the Self Managed Super Fund Professionals Association highlighted their concerns as to the basis of the increase and their doubts as to whether the case had been made out that the increase was justified. They also highlighted the fact that there has been absolutely no consultation between the Australian Taxation Office and their organisation about this increase.

I will quote from the submission of the Self Managed Super Fund Professionals Association of Australia. In paragraph 5 they say:

We believe that an increase in the SMSF levy cap—and the levy itself—should only take place after consultation between the ATO and the SMSF industry. This consultation would allow an opportunity for the ATO to justify any need for an increase in the SMSF levy to industry.

They go on to say in their submission that they have significant concerns about the particular increase in the levy which is to occur as part of this package of measures. At paragraph 8 they have this to say:

The increase to $259 represents a 35.6% increase in the SMSF levy which is the largest increase in the levy since it moved from $45 to $150 per year in 2006-07. This increase has been made without any justification to SMSF trustees why increased funding is needed for the ATO regulation of SMSFs.

So it is clear that we have here yet another poor process from this government. There has been inadequate consultation with the regulated sector, key aspects of the reforms have not been adequately explained, there has been anxiety and concern, and it is not a public policy process which observers can look at with any degree of confidence.

I turn next to the specific and central issue underlying this bill, which is the existence and quantum of the claimed shortfall in revenues the Australian Taxation Office receives from the levy, compared to the cost it incurs in regulating this sector. I asked a number of questions of the officials of the Australian Taxation Office about this very question at the hearing last week. I regret to say that it is hard to avoid the conclusion that that statement from the explanatory memorandum is a misleading statement. That is a statement which reads as follows.

The current SMSF supervisory levy does not fully recover the ATO's costs of regulating the sector.

On this point, we were informed by both the SMSF professionals association and it was confirmed by the Australian Taxation Office that the Australian Taxation Office had told an industry forum, held quite recently, that the annual cost of carrying out the supervisory functions in relation to self-managed superannuation funds is presently around $85 million per year. This raises the question: what is the revenue which is presently raised by the Australian Taxation Office from the levy? Is it more or less than $85 million? If you do the maths on the basis that the current levy is $191 per year and if you multiply that by the number of self-managed superannuation funds in existence as at 30 June 2012, you get a number which is in fact somewhat higher than $85 million. Officials of the Taxation Office did put to the inquiry that there is a reduction factor. The point they make is that not every fund which is shown as being in existence is actually still operational and you do not succeed in collecting the levy from every fund. I accept that proposition. That makes sense. But what is difficult to understand is how it can be said that the current levy does not raise sufficient revenue to cover the expenses of the Australian Taxation Office.

I asked an officer of the Australian Taxation Office this very question in the hearing. My question was as follows:

I would like to ask you about the statement you made before … that apart from the timing difference, broadly, for 2011-12 what will be collected under the levy will cover the costs?

The answer from the Taxation Office official, Mr Peterson, was as follows:

Yes, we expect it to be in that order.

In other words, officials of the Australian Taxation Office informed the parliamentary inquiry that the amount raised under the present levy covers the present costs of the Australian Taxation Office in supervising the self-managed superannuation funds sector. If that is so, it is extremely difficult to understand the justification for the statement in the explanatory memorandum in paragraph 1.5, which states:

The current SMSF supervisory levy does not fully recover the ATO's costs of regulating the sector.

It must be acknowledged that there are two factors at work here. The first is the aggregate amount that is recovered in respect of funds in existence in the relevant year. The second is the timing issue. When is the money actually collected. The explanatory memorandum points out—and this was amplified during the hearing—that there is presently a lag because the money is only collected in the subsequent year. It does not strain logic or credibility to argue that if you correct for that lag by collecting the levy in the year to which it is referrable rather than in the subsequent year, you will assist the Taxation Office to deal with the current timing mismatch; the fact that it currently faces a lag before it collects the funds which go towards the cost of carrying out its supervisory function. But of course that is a separate and distinct measure in this bill. I am not raising questions about that measure. I am raising questions about the core measure in this bill which is to increase the cap on the SMSF levy from $200 to $300 and, associated with that, for there to be an increase in the amount that will be charged in the next year from $191 to $259, I believe it is—in any event, that very significant percentage increase which was highlighted by the industry association of some 35.6 per cent.

I asked some further questions on notice of the Australian Taxation Office when they appeared before the committee hearing last week. It may be that their answers would shed light upon this central question as to how it can be said that the levy does not cover the ATO's costs when an official of the ATO confirmed to the parliamentary inquiry last week that the costs for the 2011-12 are broadly met by what is currently collected. It may be that answers to questions on notice would explain the discrepancy. I do not know because, having made inquiries with the committee secretariat this morning, to date the Taxation Office has not bothered to provide answers to my questions on notice. I want to express my regret that officials of this statutory agency have declined, or have not yet seen fit, to provide responses to questions on notice from a parliamentarian on this important matter.

The third point I want to make is that I believe there is a conclusion which is very hard to avoid from this set of circumstances which is that in substance this measure is motivated, yet again, by a desperate grab for cash from a government which has wholly lost control of the budgetary and fiscal process. If you look at the year by year impacts of this measure in the explanatory memorandum you will see that in 2013-14 it is going to raise $70 million, in 2014-15 it is going to raise $164 million and in 2015-16 it is going to raise $88 million. A significant part of this increase is due to the timing effect. In other words, up until now we have had a system where in each year an SMSF pays a levy which is essentially referable to the expenses incurred by the Taxation Office in the previous year. That is now to change so that in each year the levy will be paid in the same year as the Taxation Office incurs the supervisory experience, but during the transition period there will be a doubling up. During the transition period, self-managed superannuation funds will be paying an amount which is calculated based not only on the previous year's levy but also on the current year's levy. True it is, under the bill, this will be spread over two years, but the immediate impact of this timing change is to give a one-off benefit to this government, which is desperate for cash.

This is classically the kind of manoeuvre in the business world you see from companies which are struggling. You see this when companies for example change the timing treatment of receipts and that is precisely what we are seeing from this government when it comes to this particular measure. It is purportedly based on the need to increase what is collected because that is necessary so that the tax office's cost will be fully recovered.

As I have indicated, the evidence before the committee and the evidence contained in the explanatory memorandum raises very serious questions as to whether it is in fact true that on the present numbers the tax office is not fully recovering its costs. There are very real questions as to whether that is true. When you look in substance at what is occurring, it is quite clear that what is occurring is something which is completely typical of this government, which has lost control of the budget. It is engaged in a desperate scramble for cash wherever it can, coming up with whatever excuse it can possibly derive to justify that, and there are very real questions about whether the stated basis for these measures is truly made out.

Laura Smyth (La Trobe, Australian Labor Party) Share this | Link to this | Hansard source

One could be forgiven in this debate for thinking that this Labor federal government is the only government that has had any inclination towards increasing the SMSF levy, but reality bears out a different story. The 2007 Howard government increase of the levy ran from an existing levy of $45 to $150. My maths may be slightly wrong but I believe that that is slightly higher than the increase that we are talking about today.

When we are talking about this and why the levy is being increased, it is important to bear in mind the context of its history. Indeed, the motivations of the Howard government for making that increase in 2007 was, surprisingly enough, that the levy no longer covered the cost of the ATO's cost of regulation of the SMSF sector or the expected costs of future regulation. So it seems to me that those opposite—and, indeed, the member for Bradfield—seem to be singing a very different tune today. It would be nice to have a bit of consistency from those opposite, but I suspect I will be living in hope for rather a lot longer.

The SMSF sector, as many others have remarked, is a rapidly growing sector, and in the course of the last 10 years the number of self-managed super funds has increased substantially. As at June last year there were just under 480,000 self-managed superannuation funds in Australia. The moneys held in those funds constituted just over 30 per cent of Australia's total super savings, which makes them a very sizeable component of the superannuation industry.

The bill before us would occasion two changes to the arrangements which presently apply, pursuant to which the supervisory levy applies to self-managed super funds. The first of those changes would go to the timing of payment of the SMSF supervisory levy. The bill contemplates that this would be brought forward so that it is levied and collected in the year of income to which the supervision relates. This is a change that is consistent with the treatment of APRA-regulated funds. The effect of the change is to simply bring SMSFs into line with the other funds from the perspective of timing of payment of levies.

Having participated in the inquiry into the bill conducted by the Joint Standing Committee on Corporations and Financial Services, I am aware that some participants in the inquiry indicated that they had questions about whether the method for collecting the levy would be impacted upon by the proposed changes. Currently, the levy is collected through the annual tax return of self-managed super funds, and questions were raised regarding whether it was the case that this arrangement would be replaced with a separate process for invoicing and payment. The committee was, however, advised by the ATO during the course of the inquiry that this would not be the case, and that this would ensure that there is no further compliance burden for SMSFs arising from the change occasioned by the bill.

The second of the changes contemplated by this bill and flagged in MYEFO is that the cap that applies to the supervisory levy which can be set by the government is increased. Under the bill before us, that cap would increase from $200 to $300. The government has noted, however, that the actual amount of the levy will be $259 from the 2013-14 income year. As the supervisory levy is a cost-recovery charge, it is reviewed periodically and adjusted in circumstances where full cost recovery has not occurred. For the income year 2011-12, based on evidence given to the committee, the current cap will not be appropriate, having regard to the current growth in the SMSF sector. During the year from June 2011 to June 2012 the total number of funds in the sector grew by 80 per cent. Increased costs incurred by the ATO, combined with that substantial increase in funds, reflect that the existing cap must be adjusted. As I said at the outset, this is not the first time that a government of any political persuasion has embarked upon this process. I refer again to the 2007 increase of the levy by the Howard government from $45 to $150 on the basis that the levy no longer covered the cost of the ATO's cost of regulation of the sector or the expected costs of future regulation.

During the course of the inquiry the ATO recognised the need for it to become increasingly efficient in its supervision of SMSFs. It also noted that the calculation of the new levy actually assumes a slower rate of growth in the number of self-managed super funds than is likely to be the case. Accordingly, the ATO contemplates that economies of scale in its supervision of funds might be possible and that efficiencies might arise from that. Despite this, there seems to be no reason the levy should not be adjusted as set out in the bill and on the basis that previous governments have done precisely the same thing.

The Joint Standing Committee on Corporations and Financial Services has encouraged the tax office to release publicly accessible information on a regular basis about the costs that it incurs as a result of functions undertaken by it in the regulation of SMSFs.

The bill before us is something that has been flagged in MYEFO. It has been entirely consistent with previous actions taken by governments in relation to the cost-recovery basis upon which levies are to be charged, and it is somewhat hypocritical for those opposite to now be calling it into question. I am particularly pleased to be able to support the bill today and to have participated in the deliberations of the joint committee. I commend the bill to the House.

Kelly O'Dwyer (Higgins, Liberal Party) Share this | Link to this | Hansard source

I rise today to speak on the Superannuation Legislation Amendment (Reform of Self Managed Superannuation Funds Supervisory Levy Arrangements) Bill 2013. We have heard a number of speeches in this place as to the import of this bill, but let me recount that the bill amends the Superannuation (Self Managed Superannuation Funds) Supervisory Levy Imposition Act 1991 to increase the maximum levy payable by a trustee of a self-managed superannuation fund for an income year from $191 to $259 from the 2013-14 financial year. It brings forward the liability to pay the levy during the income year instead of the current requirement to pay some months after the year ends, when the SMSF lodges its returns.

Whilst the government made the announcement in the Mid-Year Economic and Fiscal Outlook last year that it would increase the levy from around $191 to $259, the implementation and timing is such that these changes will in fact result in a total levy being paid in the 2012-13 year of $321 and a total levy in the 2014-15 year of $388. We on this side understand that levies do need to be recovered on a cost-recovery basis. We respect that attitude, we respect that that is a responsible way to manage the budget and, in that statement, we do not oppose this bill.

However, it has been clear from the evidence presented to the Parliamentary Joint Committee on Corporations and Financial Services that there is a suggestion that the amounts and levies being charged on self-managed super funds are over and above what would be considered cost recovery. Evidence was presented to the committee by the Self-Managed Superannuation Professionals' Association of Australia that there was no justification provided, no evidence presented, by the government that this was in fact cost recovery. They said in evidence to the Parliamentary Joint Committee on Corporations and Financial Services:

As we alluded to previously, the increased costs have been around changes from the Stronger Super package. We have seen those in the 2011-12 budget papers and again in the 2012-13 papers, but, in contrast, in the recent 2012-13 MYEFO papers, there was no justification or reasons given accompanying the increase in the levy.

This was indeed curious, and members asked questions of the ATO. They asked questions regarding the increase and the bring-forward provisions of the bill. The ATO were asked the specific question:

Who proposed this increase in the levy? Was it the tax office or the government?

The ATO's response was:

I think it is best to take that one on notice. My recollection—but my memory sometimes fails—is that on this occasion the discussion was probably initiated by Treasury, but I may be mistaken.

We are not convinced that this cost increase was one that did not come directly from the government. In fact, the government has a very strong track record of ripping money out of the superannuation sector. Over five years it has ripped more than $8 billion out of the superannuation sector.

I wanted to talk in the time available today about the changes that the government has made to superannuation and how it is having a very direct and significant impact on those people who are doing the right thing—trying to save for their future and be self-reliant. It is critical that people have confidence in our superannuation system and, when people invest their hard earned money, they need certainty—certainty around how that money will be taxed going in and how it will be taxed coming out. They need certainty around the contributions that they can make. They need to know that there will not be continued fiddles with the superannuation system.

This government has in fact made more than 23 fiddles with the superannuation system. That is almost four changes every year, and that is the very opposite of certainty. Some of those changes include: the reduction of the rate at which the government superannuation co-contribution is paid from 1 July 2009 and 30 June 2014; a limit on concessional contributions, reduced from $50,000 per annum to $25,000 per annum; matching the rate for government superannuation co-contributions to be reduced from $1 to 50c, with the maximum benefit also to be reduced from $1,000 to $500; the maximum incomes threshold also proposed to fall from $61,920 to $46,920; and the indexation of concessional contribution caps proposed to be paused for one year in 2013-14 at $25,000 for individuals under the age of 50 and $50,000 for individuals aged 50 and over. That is not to mention, of course, the penalties that have been applied to those people who many have inadvertently breached the ever-moving caps that the government seems to change at every opportunity.

There are significant penalties that go towards ensuring that those people will not see the benefit of the hard earned money they have contributed to their superannuation savings to ensure that they can live the life that they would like to live in retirement. How does the provision to introduce another levy on self-managed super funds incentivise investment in our superannuation system? How does this provide more certainty? The answer is that it does not, and we have already heard from the Prime Minister that she intends to make yet further changes to superannuation. In her Press Club address earlier in the year she flagged that there will be more changes in the budget around the tax arrangements to do with superannuation.

I hear the very deep and real concerns from constituents, who raise this matter with me in a very heartfelt way and who are desperate to know what faces them in retirement. Let me read into Hansard the letter that I received from Glen. He says this:

I am writing—desperately—about the noise on taxation of Superannuation/ Pensions. My wife and I are just recently retired. I am 67 and have worked to the end. We had planned for retirement—foregoing much else to fund our superannuation. And we are totally self-funded. This was long term planning and was done deliberately not to be a burden on the Government and to enjoy some financial freedom. Although the amount we have accumulated in Super may look large, it is frightening to watch how long it is going to have to last while supporting our planned lifestyle.

To be candid, the current 'noise' is terrifying us.—

And this noise is of course coming from the government.

We had planned everything a long time ago based on Peter Costello's initiatives and have taken advantage of every new government adjustment while relying on the promises. We are asking you—

maybe that should be pleading—

to lend you weight to preventing changes for those of us who are now self-funded in retirement without any possibility of re-entering the workforce.

Let me read from what Angela sent me:

As I am facing retirement myself in the not too distant future I am deeply concerned about the proposal to tax the income of self-funded retirees in the name of addressing structural problems within the budget. The only structural problem that I can identify is the reckless and wasteful spending that has occurred over the last six years. Like many self-funded retirees, I have worked, saved and salary sacrificed in order to build-up enough superannuation to ensure that I could enjoy a reasonably comfortable retirement for as long as possible. With the exception of a small minority of wealthy people most self-funded retirees are not 'wealthy' and should not be the subject of an unfair tax impost. Apart from the activities of this government, inflation and rises in the cost of living pose the greatest threat to the financial security of self-funded retirees who are living on a fixed income. Many of them run out of money after a short period of time and qualify for a pension. For example, 10 years ago $500,000 was considered adequate for a couple to retire on. Today, financial advisers are recommending that a couple would require at least $1 million in superannuation in order to retire comfortably. It has been estimated that $1 million in superannuation will deliver an annual income of approximately $55,000-$65,000. This might seem to be a reasonable income today however in ten years time an annual income of $55,000-$65,000 may be insufficient. To give you an example, when I started working 40 years ago, I earned the grand total of $35.00 per week. Today, $35.00 might buy you a weekly zone 1 train ticket, if you are lucky.

I am concerned that self-funded retirees are viewed as a soft target by this government and their hard-earned superannuation savings are considered to be a honey-pot ripe for the picking. Any adverse changes will make superannuation an unattractive investment option for working people with the result that fewer people will be motivated to work and save towards independence in retirement. That defeats the purpose of having a superannuation scheme in the first place.

I say to Angela: I could not have put it any better myself.

Finally, let me tell you what Daryl has said:

Why is it that in this country we continue to penalise hard work, sacrifice and the occasional success?

…   …   …

I am in my late 50s and therefore approaching retirement age. I have planned for my retirement, sacrificed and worked hard to save for my retirement so I will not have to rely on government handouts. I am therefore increasingly concerned that the incumbent government … continues to covet superannuation with growing evidence that superannuation and superannuation savings could be targeted as soon as the May budget. This is of immense concern for those who have planned carefully, been thrifty and worked damn hard to build a reasonable fund balance. In some respects, one must question whether it was all worth it, or whether sacrifice, responsible savings and thrift should have given way to a more extravagant lifestyle in years past.

We on this side have given an undertaking not to muck around with superannuation, as this government continues to do. We understand the importance of certainty when people are sacrificing and saving for their retirement. We understand the importance of good and responsible economic management so that the government does not have to put its hand in the pockets of the retirement savings of Australians. It is quite, quite wrong. That is why we will stand up for all Australians who want to work hard, create opportunities for their families and be rewarded for their efforts. They should not be penalised. This government has an awful lot to learn, and, come 14 September, the voices of those people who have been penalised will be heard.

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

Firstly, I thank those members who have participated in the debate—the member for Dunkley, the member for Bradfield, the member for Higgins, the member for Blair and the member for La Trobe—for their fine contributions. This Superannuation Legislation Amendment (Reform of Self Managed Superannuation Funds Supervisory Levy Arrangements) Bill 2013 ensures that the levy paid by self-managed superannuation funds is collected in a more timely way and that the Australian Taxation Office's costs of regulating the sector are fully recovered.

The bill allows for a change in timing of the collection of the levy so that it is levied and paid in the same financial year. The bill also increases the maximum levy payable by SMSFs. The SMSF levy is intended to help offset the costs of implementing the government's SMSF Stronger Super reforms, which aim to improve the operation, efficiency and integrity of the self-managed fund sector. The bill will enhance the ATO's ability to deliver these important reforms and continue to effectively regulate the SMSF sector, thus providing better protection for fund members.

A cost recovery impact statement will be published on the Australian Taxation Office's website by 1 July this year—2013—which is when the changes are scheduled to come into effect. The statement will transparently document how the levy complies with the Australian government's cost recovery guidelines.

I will also take this opportunity to table a correction to update the financial impact section of the explanatory memorandum. The update is to allow for revised costing estimates which will be reflected in the explanatory memorandum when the bill is introduced in the Senate. I commend the bill to the House.

Question agreed to.

Bill read a second time.

Ordered that the bill be reported to the House without amendment.