Bill Shorten (Maribyrnong, Australian Labor Party, Minister for Financial Services and Superannuation) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

This bill amends various taxation laws to implement a range of improvements to Australia's tax laws.

Schedule 1 of this bill helps those nearing retirement to build the adequacy of their retirement savings. The government is introducing a higher superannuation contributions cap of $35,000 for older individuals, and I acknowledge the work of the member for Lyne in this policy.

The government believes that it is important to allow people who have not had the benefit of superannuation for their entire working lives to have the ability to contribute more to their superannuation as they near retirement.

Accordingly, the government will bring forward the start date for the new higher cap to 1 July 2013 for people aged 60 and over. Individuals aged 50 and over will be able to access the higher cap—the extra $10,000 to be contributed tax concessionally—from the current planned start date of 1 July 2014.

The government decided not to limit the new higher cap to individuals with superannuation balances below $500,000 in light of consultation and feedback from the superannuation sector that this requirement would be difficult to administer. The new simplified cap will make it easier for people to determine whether they are eligible for the higher cap. This will reduce the risk of people inadvertently exceeding their cap and improve confidence in the system.

The new higher cap is temporary and will cease when the general cap indexes to $35,000.

It is estimated that around 171,000 Australians will benefit from 1 July this year when eligibility is extended to individuals aged 60 and over and a further 363,000 people will benefit in 2014-15 when eligibility is extended to individuals aged 50 and over when compared to the currently legislated caps policy.

This measure will save an estimated $365 million over the forward estimates compared to the previously announced caps policy.

Schedule 2 of this bill amends the Superannuation (Government Co-contribution for Low Income Earners) Act 2003 to ensure that the low-income superannuation contribution, the LISC, operates effectively and as intended.

The LISC introduces greater equity in the superannuation system. The low-income superannuation contribution effectively refunds, up to $500, the tax paid on concessional contributions such as superannuation guarantee contributions for around 3.6 million low-income earners, including 2.1 million women.

These amendments ensure that the Commissioner of Taxation can estimate eligibility for this payment where there is insufficient information to make the payment under the existing rules. This will usually occur when individuals are not required to submit an income tax return as they are below the tax-free threshold.

These amendments also make a number of other technical amendments that will:

Schedules 3 and 4 of this bill will improve the fairness of the superannuation system.

Currently, higher income earners receive a significantly larger superannuation tax concession than average income earners.

Schedule 3 will sustain but reduce the tax concession that individuals with income above $300,000 receive on their concessional superannuation contributions made from 1 July 2012 from 30 per cent to 15 per cent. This will ensure that the tax concession received by higher income earners is more closely aligned with the concession received by average income earners, but superannuation contributions will still remain positively beneficially concessionally taxed for all Australians.

For constitutional reasons, and to ensure alignment with the proposed cap on the earnings tax exemption, there are some exemptions in respect of Commonwealth judges and justices, and certain state higher level office holders.

The definition of 'income' for the purposes of this measure includes taxable income, concessionally taxed superannuation contributions, reportable fringe benefits, total net investment loss and the net amount on which family trust distribution tax has been paid.

Some superannuation lump sum payments, including certain disability payments, death benefit payments to dependants and early release payments for terminal medical conditions, will be excluded from the income calculation.

The reduced tax concession will apply to all federal politicians earning in excess of $300,000, including the Prime Minister and Deputy Prime Minister.

This measure complements the low-income superannuation contribution measure, which, from 1 July 2012, effectively refunds the income tax paid by superannuation providers (capped at $500 each year) on concessional contributions for individuals with an income up to $37,000.

It is estimated that these changes in terms of the higher charges will impact approximately 129,000 people contributing into superannuation in 2012-13.

Schedule 4 will make amendments to Commonwealth defined benefit superannuation schemes by allowing a person, who is issued with an assessment from the ATO, to request that the superannuation fund pay a lump sum from their superannuation moneys, when a superannuation benefit becomes payable from one or more of the person's defined benefit superannuation interests.

Full details of the measure are contained in the explanatory memorandum.

Debate adjourned.