Andrew Leigh (Fraser, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

At the outset I should say that Labor's position is to support the Tax and Superannuation Laws Amendment (2015 Measures No. 4) Bill 2015. I expect that would not be surprising to anyone who has been following the debate on this bill, given that two-thirds of the bill are measures from previous Labor budgets.

The bill implements previous Labor integrity measures on capital gains tax, rollovers and lost member superannuation accounts and it unifies the tax treatment of all civilian and Australian government employees who work overseas.

It is greatly pleasing that the Abbott government is proceeding with some of the measures that Labor had planned to implement. Up until recently you could be forgiven for thinking that the sole raison d'etre of the Abbott government was to tear down prior achievements of Labor governments, so it is good to see a tax and superannuation laws amendment bill that indeed implements these sensible integrity measures.

Going to schedule 1, improving the integrity of the scrip-for-scrip rollover, we welcome the government's move to implement our integrity measures on scrip-for-scrip rollovers. The scrip-for-scrip rollover regime ensures that tax considerations are not an impediment to takeovers or mergers involving companies or trusts.

Recent court cases have shed light on the tax minimisation opportunities arising from ambiguity in the existing legislation. This reform, first announced by Labor in 2012, prevents entities from indefinitely deferring capital gains tax obligations and brings greater consistency to the taxation of trusts.

Schedule 2 is the exemption of income earned in overseas employment. The opposition is comfortable with the government's efforts to boost the integrity of our personal income tax system by standardising the tax treatment for workers delivering overseas development assistance. This integrity measure improves the consistency of our personal income tax system by upholding the principle that Australians should pay tax on their earnings somewhere.

This provision was originally introduced to ensure that aid workers working overseas were not taxed on their income both in Australia and in the source country. However, the provision no longer serves this purpose, with Australians working overseas often able to avoid income tax in both jurisdictions.

While we welcome efforts to tighten the tax net, I would contrast the government's approach to the issue of double taxation of individuals with its approach to the double taxation of corporations. Earlier this year Labor announced a multinational tax package, which included a measure for tackling hybrid instruments. What we were allowing the Australian Taxation Office to do under our proposal was to look at how a hybrid instrument was treated by an overseas jurisdiction, essentially to ensure that a hybrid instrument could not, effectively, avoid tax in multiple jurisdictions.

So it is striking that, while the government are willing to tackle this issue in the case of aid workers, they are not willing to tackle the same issue when it comes to big multinational corporations. The principle is a sensible one. Multinational corporations are looking at how a hybrid instrument is treated by the tax regime of another country and how it is treated by the Australian Taxation Office. The ATO should not be blind to the way in which an overseas tax office treats a hybrid instrument.

Unfortunately, while the Treasurer has been talking about acting on multinational tax for over a year we, again, see promises, coming out today, that he will act. But we are yet to see actual legislation. By contrast, Labor's multinational tax plan, announced in the first half of this parliamentary term, raises more than $7 billion over the decade, is informed by work in the OECD and is carefully costed by the Parliamentary Budget Office.

Schedule 3 of this bill is the small lost member account threshold. Labor will support raising the threshold at which the government collects small lost member superannuation accounts.

Labor invented Australia's universal superannuation system and it was hard fought by the coalition at the time. When the Keating government introduced universal superannuation in the early 1990s those opposite railed against universal superannuation. They promised, before the 1996 election, not to tinker with superannuation but then froze the superannuation contribution rate throughout the period of the Howard government.

Again, history repeated itself because, in 2013, the opposition promised that they would not make adverse unexpected changes to superannuation but went ahead and froze the superannuation contribution rate at 9½ per cent, not allowing it to continue on its planned trajectory through to 12 per cent, which would have guaranteed a more dignified retirement for many Australians.

The system of collecting lost member accounts is sensible. It is easy for Australians to be reunited with their lost superannuation accounts, using a simple tool available on the tax office website. But the decision that the government has made in the past is that, when accounts fall below a certain amount, they should be transferred to the Australian Taxation Office to ensure that they are not completely eaten up in fees and charges. Many young people know the experience of moving from casual job to casual job, ending up with a motley of superannuation accounts and wanting to consolidate those accounts.

Before we had the lost super regime, those accounts would often just be gone within a matter of months. Thanks to the lost super regime, those accounts, when found, actually contain a reasonable chunk of money—about what the individual put in.

In May 2012 Labor increased the threshold at which an account would be shifted to the Australian Taxation Office from $200 to $2,000. In the 2013 budget Labor proposed an incremental increase in the threshold from $2,000 to $6,000. I note in passing that, when it comes to unclaimed moneys, the coalition is happy to run a scare campaign and crazy talk of 'trousering', with the suggestion that anyone who believes in a different duration after which bank accounts should be moved to the government is somehow trying to steal people's money. At the same time, we have a government bill in the House whose effect is going to be to move more superannuation accounts into the government.

The principle in both cases is the same: we want to make sure that people who have lost their bank account or superannuation account do not find it again but discover there is nothing in it. Yet we also want to guard against the possibility that someone who simply has not accessed an account for a while may not want it transferred to the government. The thresholds—duration or financial as they are—aim to get that balance right, but the government is clearly pursuing a somewhat different approach to superannuation accounts from what it is with bank accounts.

In the spirit of constructive bipartisanship Labor will support this measure, and we do so knowing that, as of 30 June this year, over 14 million Australians have a super fund account and approximately 45 per cent of these people have more than one superannuation account. We know through figures from the Australian Prudential Regulation Authority that the median figure for fees and charges for low-cost superannuation accounts is $532 a year. So, if you have a super balance of $1,000, you will see it entirely eroded by fees and charges in a couple of years. That is the principle of lost super laws, which see accounts moved to the tax office when they fall below a certain threshold—currently $2,000 and, under this bill, $6,000. These measures will, hopefully, ensure that low-wage workers and those working casual jobs are able to retire in more dignity knowing that their accounts have not been eaten away by fees and charges.

At the same time, you cannot talk abut superannuation in this place without acknowledging that there is only one party of government in this parliament who believes that our superannuation tax concessions are not fair and are not sustainable. The age pension is set to grow around five per cent a year over the next four years. The government says that the age pension is out of control because of that, but superannuation tax concessions are growing at more than four times this rate. The earnings concessions alone are set to double over the next four years to more than $30 billion. It will soon be the case that we spend more on super tax concessions than we spend on the age pension entirely. A Grattan Institute report on tax reform found that more than half of the benefits of superannuation tax concessions go to the top 20 per cent of households. Indeed, the top one per cent of households gain more from our super tax concessions than the bottom 40 per cent.

To improve the fairness and sustainability of our superannuation system, the opposition has made clear that we will ensure that earnings in excess of $75,000 in the retirement phase are taxed at a concessional rate of 15 per cent rather than being tax-free. This represents a partial unwinding of one of Peter Costello's many imprudent decisions in the later phase of the Howard government, this one removing entirely the tax-free status of earnings in the pension phase. That is a measure which has disproportionately benefited high-income earners and done little to take pressure off the age pension but instead had the effect of acting as a windfall for those who are able to recycle their earnings through the superannuation system. Labor does not propose to entirely reverse that Costello decision of 2006, but we do propose, if we are fortunate enough to win government, to ensure that earnings over $75,000—and just the marginal amount over $75,000—are subject to a 15 per cent tax rate.

We have also indicated that we will lower the threshold for the 15 per cent high-income superannuation charge from $300,000 to $250,000. Those two measures together save the budget in excess of $14 billion over the decade. They are responsible, they are fair and they will put our superannuation system on a more sustainable footing for the future.

Labor are hardly the only ones who believe that our superannuation settings need to change. We can go through those who support some changes to our superannuation system and start with the Secretary to the Treasury, John Fraser. The government's own tax white paper asked the question, 'Are Australia's superannuation tax concessions sustainable?' A range of groups across the political spectrum have called for the government to engage in a sensible debate over superannuation tax concessions. They include the Association of Superannuation Funds of Australia, the Business Council of Australia, the Australian Council of Social Service, AustralianSuper, the Grattan Institute and Rice Warner actuaries. Indeed, the recent reform summit co-sponsored by The Australian newspaper and the Financial Review newspaper saw as part of its communique a recognition that we need to look carefully at our superannuation tax concessions. We need to make sure that they are fair for this generation and fair for generations to come such as the students now filing into the public gallery above us.

What does the government have to say about these unfair and unsustainable superannuation concession? It depends on who you ask in the government, as with many things. The member for North Sydney refuses to rule out changes, but the Prime Minister is slamming the door on him, saying that there will be no changes whatsoever. As usual, the member for Kooyong would like to have it both ways—

Mal Brough (Fisher, Liberal Party) Share this | Link to this | Hansard source

Mr Deputy Speaker, I have a question to shadow minister. Would he mind sharing with the House what he deems to be fair in relation to this bill?

Bruce Scott (Maranoa, Deputy-Speaker) Share this | Link to this | Hansard source

Order! You need to ask the member if he would accept a question.

Mal Brough (Fisher, Liberal Party) Share this | Link to this | Hansard source

Mr Deputy Speaker, I seek to intervene. Would the member for Fraser be generous enough to accept a question on fairness and what he considers to be fairness?

Bruce Scott (Maranoa, Deputy-Speaker) Share this | Link to this | Hansard source

Is the member for Fraser willing to give way?

Andrew Leigh (Fraser, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

If the member follows proper procedure, I would be pleased to accept a question from him.

Mal Brough (Fisher, Liberal Party) Share this | Link to this | Hansard source

On behalf of the opposition: would the shadow minister, the learned gentleman that he is, like to share with the parliament and the people of Australia what he thinks is acceptable, what he believes is fair and what he would do in government?

Andrew Leigh (Fraser, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

I thank the member for Fisher for the question, and I assure the House that this is not a question I wrote earlier, although it is indeed an excellent one. Labor's policy on superannuation is one which has been announced on early in this term of government, in order to promote exactly the sort of healthy public debate that I know the member for Fisher believes in. We recognise that superannuation changes are not universally popular, and that is why we have begun the community conversation about Labor's changes. Yes, they raise $14 billion over the next decade, but they do so by reversing a Peter Costello change—which I hope the member for Fisher no longer believes was a fiscally prudent one—and by changing the high-income superannuation charge.

But the real question here is where the government stands. It is unusual for a member of the opposition to be saying this, but I honestly do not know. The member for North Sydney does not want to rule out any changes, but the Prime Minister does want to rule out changes. The member for Kooyong wants to stay on the good side of both of them, so he will rule things out or in according to which day the of week it is and which radio interview he is doing at the time. We know indeed that the government was considering making superannuation changes right up until the day Labor announced its policy package. Indeed, plausibly, some of the talented Treasury officials sitting in the boxes today were working on the memorandums that we know, thanks to freedom of information laws, were being sent up to the government during this period. We know that there were four briefs that went to the government in the lead-up to the 2015 budget, but they stop on a particular day. No prizes for guessing which day that is—that is the day that Labor made its superannuation announcement. How is that for a coincidence?

As always, we have the government playing politics over the policy. The Prime Minister rolled the Treasurer on the issue of superannuation tax concessions—admittedly, a feeling that the Treasurer must be getting used to by now—and doubled down against any change, saying, 'We aren't ever going to increase the taxes on super. We aren't ever going to increase the restrictions on super.' As with some of the Prime Minister's statements, that needs a little parsing. What he means when he says, 'We aren't ever going to increase the restrictions on super', is that the coalition will not tackle one of the fastest-growing areas of tax expenditure to get the budget under control. He means that the government will not act to make superannuation fairer and more sustainable. He means the government will continue a system where the vast majority of superannuation concessions go to the most well-off, and the lowest paid Australians get nothing.

Let us be clear. When we are talking about superannuation, as this bill does, we need to recognise the role of the super tax concessions. They do two things. They recognise the public benefit in reducing the number of people who claim the age pension, and they recognise the public benefit in having a larger national pool of savings. That second public benefit is tangible and was important in the global financial crisis but surely must be accorded less weight than the first. For people with multimillions in their superannuation accounts, I say, 'Good luck to you. Congratulations, but you should not necessarily be claiming the same superannuation tax concessions as you did in the past.'

Labor's policy is costed and sustainable and is something which I hope the government will engage on. I hope the government will go back to those excellent briefs, which I am sure were being prepared for them by the Department of the Treasury in the lead-up to Labor's announcement, and come to a bipartisan consensus with Labor on making sure that our super tax concessions can be sustainable in the future. We have no problem with the government's proposal to increase the threshold for collecting lost members' accounts, but we want to make sure that the government engages in the bigger conversation over super concessions. It is such an important conversation, particularly for those of us on this side of the House who were responsible for creating universal superannuation and who will continue to defend a strong and accessible superannuation system. I move the second reading amendment that has been circulated in my name:

That all the words after "That" be omitted with a view to substituting the following words:

"while not declining to give the Bill a second reading, the House condemns the Government's failure to address unfair and unsustainable superannuation tax concessions."

Bruce Scott (Maranoa, Deputy-Speaker) Share this | Link to this | Hansard source

Is the amendment seconded?

Julie Owens (Parramatta, Australian Labor Party, Shadow Parliamentary Secretary for Small Business) Share this | Link to this | Hansard source

I second the amendment.

David Gillespie (Lyne, National Party) Share this | Link to this | Hansard source

I rise to talk on the Tax and Superannuation Laws Amendment (2015 Measures No. 4) Bill 2015. This bill addresses very many important issues about the integrity of our tax system. For most of us, accounting—if you studied economics and accountancy in any shape or form in tertiary studies—is a pretty dry topic but, unfortunately, tax changes everything. Tax is what delivers the nation's finances, to pay for all our responsibilities, whether they be the Medicare system, hospitals, defence forces, roads—you name it. So we have to have a tax system that is (1) not punitive and (2) has its own essential integrity.

There are three issues in this legislation that we need to pay attention to, and I will take the third one first, because in my electorate and in my experience it is the one that affects most people. That is the small lost member account threshold. It is not uncommon for most employees in this day and age to move around many jobs in their careers. During that time, they are often signed up to industry default super funds or different funds from the ones in their previous employment, and many fail to have these funds rolled over into the next one or to have the new employer paid contributions put back into the existing superannuation fund. So it is not uncommon for many people to have several small superannuation funds, all being hit with fees and charges or having contributions deducted for insurance policies that many of them did not even know were part of their superannuation policy. As a result, these deductions amount to more than what is being accumulated or, in some cases, more than what is being contributed.

So I think this is a very wise manoeuvre for many people. It redefines an 'idle account' as one that has not been accessed for five years, and it facilitates rolling those idle funds into the tax department, where no fees and charges are levied. In fact, there will also be a portal where people can identify and get hold of these accounts and remove them from the tax office with interest paid, which is quite different from the 'trouser tax', where it was bank deposits that were being taken into the tax department. I think this is a sensible amendment, and people will really value it, particularly a lot of people with low wages who have many accounts lying idle just being eroded by interest charges, fees for management and, as I mentioned, the not uncommon occurrence of a super fund being associated with an insurance policy for people who do not know they are paying for it. This will be a big benefit.

The second matter is the scrip-for-scrip rollover provisions. These will be amended so that the tax liability for shares or interests, when traded in mergers or acquisitions, does not occur immediately. That is a bad thing. If a company is being taken over and there are shares being traded for new shares, there is a perceived financial benefit, but then, if the perceived benefit is put to the merged or acquired company straightaway, it can destroy the benefit of the merger altogether. But we do not want the other side of the coin, where the entity, the trust or the new company permanently avoids any tax liability, which is what our very clever accountants can sometimes do by issuing a large amount of debt or so-called thin capitalisation.

So this is another integrity measure. It does not sound very sexy, but it is really important because the amount of money that can be sheltered in these arrangements is huge. Most of the people in my electorate, who pay tax as they earn, get really annoyed when they see the use of thin capitalisation, transfer pricing or complex accounting manoeuvres to defer the liability of companies. Every company should pay its fair share, just like every citizen should pay their fair share. So a principle of keeping the integrity of our tax system in place is addressed through this.

The third issue is double taxation. Legislation introduced 70 years ago was put in place so that people do not pay tax overseas in one country and then have to pay it in Australia and vice versa, so they are not getting taxed twice. But there was a loophole where, if you were overseas working for the government for more than 90 days, not only did you miss out on being taxed doubly but the taxing did not happen at all. That was a very sweet spot for some individuals. This amendment will allow tax to be paid in Australia on your earnings and allowances if you are in that situation, working for the government, but it does not change it if you are an ADF member, a Defence Force person or a registered charity working overseas for the government.

So these are sensible amendments, which I commend to the House. But, before I finish, I would like to just make some comments on those made by the member for Fraser. The Labor Party's proposal is a tax on earnings above $75,000 at 15 per cent as they come out of a super fund, then changing the thresholds down to $250,000. I am very concerned by this because it just pinpoints the attitude of the other side towards superannuation. It is seen as a piggy bank to fix up all the problems that they have created by reckless fiscal abandonment of sound, sensible budgetary measures.

The superannuation holdings of Australian citizens should not be treated as a piggy bank for fixing debt and deficit problems. If you are going to tax superannuation payments, which have been taxed at either 15 or 30 per cent going in and then at 15 per cent during their earnings and accumulation phase, and if it is to be treated as a pension when you take it out, the logical progression from that is that you should also tax the pension. Or, if you put money into a bank deposit account or an interest-bearing account after you have paid your tax, which is pretty normal behaviour, when you take it out of a bank savings account, if you are taking more than $75,000, you should be taxed an extra 15 per cent on it—follow the logic of their argument.

People have paid tax. Superannuation contributions get a tax benefit because the nation has encouraged people to do it. That is why they have superannuation funds. It is a way of avoiding the government having to provide a pension. That is the whole aim of it. If you destroy the benefit and put another 15 per cent on it, the amount that people put into super will shrink. It then defeats the purpose for which it was created. As I mentioned, superannuation fund holdings of Australian citizens should not be treated as a piggy bank for the government to fix our debt and deficit problems. People have paid tax on it—yes, it is less than what the top marginal tax rate is, but it was created that way so that people would put money into it and would then look after themselves rather than turning to the pension.

I commend to the House the Tax and Superannuation Laws Amendment (2015 Measures No. 4) Bill 2015. There are three separate measures in it which make a lot of common sense. There is fairness and integrity at the very heart of these changes, and I commend them to the House.

Julie Owens (Parramatta, Australian Labor Party, Shadow Parliamentary Secretary for Small Business) Share this | Link to this | Hansard source

I take exception to a few things that the member for Lyne said, but I will address just one of them today. He said that tax law amendment bills are not sexy, but they actually are. I have said a number of times in this House that the tax law amendment bills and the tax and superannuation amendment bills are a pleasure to speak on because they deal with the operation of the government. Governments introduce pieces of legislation that make changes. As those changes are bedded in you quite often see small changes in the tax law as the community adjusts and as policy adjusts slightly. For example, you will see that shortly after a government provides funding after a natural disaster a TLAB come into the parliament to ensure that those act of grace payments are not taxed.

These bills are quite interesting and are usually filled with a range things that reflect the policy of the government over the previous years. The Tax and Superannuation Laws Amendment (2015 Measures No. 4) Bill 2015—known as TSLAB4, a very sexy name—is a very good reflection of what this government is up to and what this government is not up to. I am going to talk though some elements of this bill while keeping that in mind. It is a very interesting reflection on this government. In many ways what is in this bill reflects the policy agenda of this government as a whole.

The bill has three schedules. Schedule 1 improves the integrity for the script for script rollover. This does not refer to a policy of the Liberal government but actually adjusts a policy introduced in the last years of the Labor government. It was a Labor government measure from the 2012-13 budget that made it harder for companies and trusts to avoid capital gains tax. The purpose of the script for script rollover, which is the policy from 2012-13, is to ensure that tax considerations are not an impediment to takeovers or merges involving companies or trusts. If shares or trust interests are exchanged for similar interests in another entity in a takeover or merger, the script for script rollover defers taxing a capital gain on the disposal of the script until the disposal of the replacement script. That is the kind of language you find in TSLABs.

Mal Brough (Fisher, Liberal Party) Share this | Link to this | Hansard source

You find that sexy? I am concerned.

Julie Owens (Parramatta, Australian Labor Party, Shadow Parliamentary Secretary for Small Business) Share this | Link to this | Hansard source

I actually do. I actually think that it is really interesting. I can see that there is another member of the government who does not think that tax law is sexy, but they are wrong and should get into it. It is really interesting.

Anyway, it was a policy that responded to the behaviour of various companies and improved the integrity of the tax system at that point. This small change in schedule 1 deals with the fact that in certain cases where the same person or group has influence over the acquired entity and the inquiring entity they were able to defer the capital gains tax indefinitely. This little piece of tax law improves something that was introduced back in 2012-13 and improves the integrity of the tax system. It is an important small change.

The interesting thing about this is that, like so many of the bills this House introduces, it refers to what the Labor government actually did. Many times last year I sat in caucus looking at the list of bills that were going to be introduced into the House, and unless they had the words 'abolish', 'cut' or 'repeal' in them, you could bet that the vast majority of them were actually Labor bills or referred to work that we had done when we were in government that were finally being brought to the House. This is another example of that. This does not reflect on the work of this government; this actually reflects on the good work of the previous government. That is schedule 1.

Schedule 2 is actually something specific to this government. Schedule 3 is not, but schedule 2 is. As a general rule Australian resident individuals are taxed on their worldwide income through the Australian personal income tax system. As the member for Fraser said, the Labor opposition—and I assume the Abbott government—agrees that a person should pay tax in one jurisdiction or another. We have been very strong on that. We have also been strong on corporations having the same responsibility. The government are less strong on that, but they are very strong on individuals paying tax in one jurisdiction or another. It would be nice to see some TSLABs come up that reflected their work in corporate payments, not just individuals.

This was originally introduced to provide relief from double taxation, essentially for aid workers and people who worked overseas for not less than 91 continuous days. Tax law always says 'not less than' and 'not more than'. It is interesting language. You have to pause and think about it for a bit, but it is quite interesting. That was its purpose We have found since then that the measure is no longer really applicable so it is no longer necessary. Essentially, schedule 2 just makes a small change to the law relating to people working overseas and it will raise $6.7 million over the next four years. It is a very minor change. It will affect a small number of people. It will raise $6.7 million over four years. It is the kind of mechanical work that we would normally see governments do.

By the way, in past governments we would very rarely discuss this kind of legislation in this House. This kind of bill was usually debated in the Federation Chamber. It is very rarely debated in the main House, because we usually have more important legislation to consider here. This government does not actually have much on the legislative agenda. For example, if you look at the day to day we have got the abolition of bills that have not been in use for decades, we have got the removal of commas, we have got the removal of a few hyphens, we have got this bill and we have got another bill that rolls back tax transparency legislation for private owned companies from the disclosure of taxpayer information—and that is it on the agenda in this House today.

Schedule 3 is also something that refers back. There are only three schedules in this bill. Schedule 3 refers back, again, to the work of the previous government, not the work of this government. Schedule 3 is about small lost member accounts. It does something that was introduced by Labor. Back in 2013, Labor announced that the threshold for super accounts which would be transferred to the ATO would rise to $4,000 from 31 December 2015 and from $6,000 from 31 December 2016.

This small but significant change in schedule 3 reflects the policy of the Labor government back in 2013 and it is important. Again, it reflects the extraordinary amount of work that Labor did in the super arena in its time in government. It does not reflect the work that this government has done at all. It reflects the work that the previous government did and brings it two years later into Australian tax law. Essentially Labor did an incredible amount of work, having introduced the super compulsory superannuation nearly two decades ago now.

We found that a large number of people had a variety of super policies, some very small, some that they had forgotten about. Some people went to work for one employer, a super scheme was started, they moved on to another employer and some of us—and I was one of them—had a number of super accounts that were sitting out there in the ether. I could not remember where they were; they were hard to find. We found that there were millions of super accounts that were essentially sitting idle with large fees coming out every year and eroding the value of those super accounts. We did an extraordinary amount of work in government on assisting people to find their lost super. We set up processes and systems where people could easily identify past superannuation accounts and amalgamate them if they chose to in order to keep their fees low.

This small change to the superannuation law increases the value of the accounts that are now transferred to the ATO from $2,000 to $6,000 over the next couple of years. This means that those accounts will be transferred to the ATO. If a person finds those accounts again, they can have them back again with interest at CPI. It ensures that the small superannuation accounts, of which there are many in Australia, are not eaten up by fees. It is a very nice piece of policy. Again, it demonstrates the previous Labor government's commitment to making our superannuation system sustainable and fair.

I cannot say though that we have had the same commitment to super from the current government; in fact, quite the contrary. Even though they say they are in favour of superannuation; their actions show something else. They claim that they will not touch super but actually they already have. The coalition wound back superannuation tax concessions for some of our lowest-income workers, some 3.6 million workers, that benefited from the low-income superannuation concession earning less than $37,000 per annum. They now virtually receive no concession on their superannuation contributions thanks to the government's decision to scrap the low-income super contributions scheme.

This is a government that claims to be supportive of superannuation, that proudly defends some of the highest income earners from superannuation but at the same time hacks away at the savings on the earnings of people who earn the least in this country, a pattern that we have seen from this government over and over again. When we see the government come in here with cuts on their mind, you can bet they will be aimed at the people who earn the least. You can bet they will be aimed at pensioners, for example. Unable in their first budget to really hit pensioners as hard as they wanted to, they moved up to attack part pensioners in the second budget. They are still leaving alone the people that earn $100,000 or more. They are leaving those alone. They are protecting those, they are defending those at the same time that they have already ripped away superannuation concessions from 3.6 million workers that earn less and $37,000 a year.

I would love to see some TSLABs in this House that actually do reflect a government that is looking forward. I would love to see TSLABs in this House that deal with things that this government is building. I would love to see that. This is not one of them. This TSLAB has three schedules, two of which refer to the work of the past government not this one. It is a shame. I think the Australian people need more from this government. It is about time they tried to deliver. Perhaps good government can start tomorrow.

Dan Tehan (Wannon, Liberal Party) Share this | Link to this | Hansard source

I can reassure the member for Parramatta that this government is about letting business get on with their work and lowering the barriers to growth. That is our focus. It is about reducing taxation. It is about reducing regulation. It is setting our economy up for the 21st Century through the negotiation and finalisation of three free-trade agreements, two of which have now been entered into law and one, we hope, the other side will get out of the way and let us get on with that one as well so we can continue to set this economy up for the 21st Century. The Labor Party do not believe in a 21st Century economy; they believe in a 20th Century economy. We want to make sure that we set this country up for the future. That is what these amendments do to this TSLAB No. 4. It requires the government to tidy and trim the laws around taxation, keeping and maintaining an efficient and fair system for all Australians.

This bill will put in place a number of changes from taxation exemptions to superannuation. Firstly, the government is moving to keep a more common-sense approach to Australia's merger and acquisition laws. They are doing this under schedule 1, which is about improving the integrity of scrip for scrip rollover. What does this mean? This measure strengthens the integrity in the scrip for scrip rollover rules to ensure that they are better targeted and work as intended.

Subdivision 124M of the Income Tax Assessment Act 1997 contains the scrip-for-scrip rollover rules, which provide tax relief in certain merger and acquisition transactions. A scrip-for-scrip rollover is available for restructures where an entity or individual exchanges original shares or interest it holds in an entity for new shares or interest in another entity. The scrip-for-scrip-rollover aims to ensure that tax considerations are not an impediment to mergers and acquisitions of companies and trusts. The scrip-for-scrip rollover operates to defer the tax otherwise payable on the exchange of the original shares and interest until such time as the new shares or interest are disposed of. Integrity measures exist to ensure that tax payable is not deferred indefinitely. Tax relief will not be available where the same person or entity controls both the acquiring entity and the entity being acquired.

What, in short, will this mean? It will mean that we see an improvement in the integrity of the system by removing the ability for some entities to access tax relief from the Australian taxpayer when two merging companies are owned by the same people or business. It does this by making definitions clearer and that the integrity structure cannot be circumvented by businesses, trusts or companies. These changes will make our system stronger and easier to understand. Common sense for businesses will create growth and jobs for the economy.

Another amendment implemented by this bill is the tightening of income tax exemptions for some employees who are working overseas. Employees of an Australian government agency who work overseas for more than 90 continuous days delivering official development assistance will no longer be able to claim an income tax exemption on the income they earn delivering official development assistance overseas. This amendment is estimated to result in a revenue gain of approximately $6.7 million over the forward estimates. When will this change take effect? The amendment will apply from 1 July 2016, commencing in the 2016 income year. It will make it clear that no Australian Defence Force or Australian Federal Police personnel access an income tax exemption under a different provision in the income tax law, and that provision will not be affected by this amendment.

Currently, this exemption can be used for Australian public servants or government employees who operate overseas for more than 90 days. Originally, the exemption was aimed at preventing double taxation where a worker was going to be caught by taxation at home and overseas. However, these situations no longer apply for these workers. What it has become is a tax break for many Australians who will not pay income tax to Australia or the country in which they are working. This is something that the government is looking to close down, as Australians expect all to pay their fair share in tax. I am sure this is something which is shared on all sides of the House. The changes will come into effect from 1 July 2016 and it is expected to provide, as I mentioned before, $6.7 million over the forward estimates. I reiterate, the government would like to make it clear that these changes to the overseas income tax exemption laws will not affect any members of the Australia Defence Force, Australian Federal Police or private charity and aid workers.

The final change being made by these amendments is to the laws around lost superannuation accounts. The ATO has shown that 45 per cent of working Australians have more than one superannuation account. This measure will increase the superannuation account balance threshold below which lost member accounts are transferred to the ATO as unclaimed superannuation money. For super accounts with smaller balances, fees and charges can exceed any investment earnings, leading to erosion of the account balance. This can be particularly problematic for lost super accounts because, in most cases, the members are not aware that they have these accounts and can end up losing money through fee erosion—money that was meant for their retirement. Transferring lost super accounts with low balances to the ATO helps protect these balances and preserves their value until they can be reunited with the member.

This measure was first announced by the former government in the 2013-14 budget. On 6 November 2013, the government announced that it would enact the measure. The government's decision to proceed with the increase to the small or lost member superannuation account threshold is a sensible measure and one which, I think, shows that when members opposite put forward proposals that we think have some merit, we are prepared to look at them and make sure that there are no unintended consequences—not something that the opposition were very good at when they were in government. We have learnt from that. We have looked very closely at where things have been proposed and where we think there are no unintended consequences we have decided to act, and this is what we have done in this situation.

This is simply a by-product of the transition that Australians make between jobs: new accounts get set up and old accounts forgotten. We know that many Australians—up to 70 per cent—simply sign up to a default provider of their employer. Often these forgotten accounts can have substantial amounts of money and every penny counts when it comes to super and your retirement. If you are hanging onto this money and putting in super, obviously you are doing so for 10 or 20 and sometimes 30 years. So every extra dollar that you can save over time obviously adds up and can be worth a substantial amount to you when you finally access your retirement savings.

Currently, these forgotten accounts will be transferred to the ATO for safekeeping after five years if the provider has lost contact with the account owner and the account has less than $2,000.

The benefit of the account being transferred to the ATO is that it can then be held until the original owner is found. While the ATO holds the account, they are not being charged fees or premiums, which ultimately can whittle down these savings. More importantly, the ATO will pay a reclaimed account with interest in line with CPI. I think that is worth reiterating: the ATO will pay a reclaimed account with interest in line with CPI. So, not only are we preserving the superannuation amount and protecting it from freeze, but if the resultant person is found and can be linked back to their superannuation account then the ATO will pay a reclaimed account with interest in line with CPI.

However, $2,000 is quite a small amount as a threshold. Under these changes, the amount will gradually move to $4,000 and then $6,000. This move will mean that more of these forgotten accounts can be captured and held until they find their owner again. This change is complemented by the six other measures that will reduce red tape for superannuation funds by removing redundant reporting obligations and by streamlining some of the lost and unclaimed superannuation administrative arrangements. These include: updating the definition of 'uncontactable' to account for contemporary forms of member communication, for example online communication; supporting eligible rollover funds proactively consolidating lost accounts; and allowing direct payments of lost super held by the ATO to persons with a terminal illness. These changes will make it easier for individuals to be reunited with their lost and unclaimed superannuation.

The ATO has a range of strategies in place which aim to reunite members with lost and unclaimed superannuation accounts and reduce the number of unnecessary and inactive accounts in the superannuation system. So, once again, this is not just about shepherding these superannuation accounts to the ATO; it is also making sure the ATO has a range of strategies to reunite people with their money, because it is a priority of this government to reunite as many people with their money as possible—to get government out of their lives and to reduce the taxation and regulation burden on them.

Some of the strategies are matching superannuation accounts to an individual, providing this information on an online portal, and proactively working with super funds to ensure they have updated addresses and contact details for their lost members. The ATO in this plays a valuable role. As I have already outlined, they can save the superannuation account from being eaten by fees and charges while it has been abandoned, but they are also the organisation who can keep track of the health of Australia's superannuation system. By having the ATO as the guardian of forgotten accounts, they can assess the amounts that Australians are leaving in these accounts when they move on.

It gives the government and the tax office an indication as to which demographic are forgetting about super and as a result which group of Australians might be at risk from losing their super. Then we can sensibly just use information campaigns to ensure that that group of people understand the importance of superannuation, ensure they keep contact with their superannuation accounts and, if necessary, especially if they are changing from one job to another, ensure they keep rolling their superannuation over into the one account. This information can then be used to target them through ad campaigns, super education initiatives and so on in order to ensure that Australians are getting the most out of what they put into superannuation.

The amendments in the bill are a reflection of this government's commitment to sound economic management. That is something which will be music to the ears of many Australians who saw the disasters of the unsound economic management that took place under the stewardship of the former Labor government. These are sensible changes. There may not be any photo opportunity here for members; that is what seemed to dictate those opposite but it is not what dictates here. We just want to make sure that we are doing the best thing for Australians and their money. This is the work that we need to continue to do to keep Australia running well.

Maintaining our taxation system so that it is built on common sense and works for Australians is key to good government. Maintaining our superannuation system so that it is built on common sense and works for Australians is also key to good government. Under the stewardship of the Prime Minister, the Treasurer, the Assistant Treasurer and the Parliamentary Secretary to the Treasurer, what we are seeing is a sound and sensible approach to making sure our taxation system and our superannuation system works for all Australians.

Andrew Laming (Bowman, Liberal Party) Share this | Link to this | Hansard source

It is great to follow the member for waning to talk about three unrelated but important schedules in this bill.

The first one is quite an esoteric recasting of the scrip for scrip arrangements that apply to mergers and acquisitions. The second one—more relevant to many of us, I think—is the tax treatment of money earned overseas, particularly by Australian government employees who are deployed for 90 days or more. Then finally there is one that is very close to the hearts of us all: lost superannuation. Australia is second only to Chile in leading the way in superannuation reform; setting up private superannuation alternatives to state funded pensions. But this great challenge remains: unlinked superannuation accounts, particularly the smaller ones, being lost by Australians.

Briefly, without detaining the House further, the important changes in the scrip for scrip arrangements basically recognise that increasingly it was not working in the way it is was intended. This was initially to promote the process of mergers and acquisitions in this country, to make sure there were not tax impediments to doing it. But what was discovered was that these laws were being used inappropriately. This is effectively an integrity measure. It would be very difficult for anyone to disagree, particularly where tax rollover relief was being provided to entities where related parties were both the vendor and the purchaser.

These can potentially apply where a company or trust is exchanging for similar shares or interests, and the tax that is ordinary payable at the time of the exchange is basically deferred until those new shares or interests were sold. This reduces the cost of takeovers and reduces the complexity of the M&A process, as the acquiring entity does not have to compensate for the share or interest holders for those taxes that would otherwise be payable. A recent court decision, which has probably prompted these arrangements, highlighted that the integrity rules were not operating as was intended and that to strengthen these rules would be a common-sense approach. The measure also changes the treatment of some acquisitions which involve the use of debt to reduce tax payable. It is all common sense, and I do not think there would be any controversy in this House for moving ahead with those changes.

Secondly, there are not a large number of us who get to work overseas, but it is common for young professionals and certain placements are tax exempted. This bill particularly focuses on overseas development assistance and Australian government employees who could be posted overseas for more than 90 days and potentially be earning untaxed income. These ideas were originally put in place because we were trying to avoid double taxation, but that is no longer the case. It is very important to mention that these moves, which were initiated by the previous government and are being tightened in this process by the current government, will not have an impact on private aid workers, charity workers or Australian Defence Force personnel.

Fifteen years ago I found myself completing an overseas degree and acquiring a job at the World Bank. It very much surprised me that the country was effectively blind to my earnings while I was working for the World Bank, and this was under this fairly unusual concession that allows money earned under these arrangements to be tax free. While I was not on a direct placement from the Australian government, my next job was working for the transitional authority in East Timor. That was a similar arrangement. I was employed under the UN, but it was not an official Australian appointment so it still basically meant that all of that very generous payment for those months I worked overseas was not considered as taxable income in Australia. While I might have benefited temporarily from those arrangements, $6.7 million over the forward estimates would be secured with this policy change. I think this is a small but important modification to ensure a fairer tax system.

Lastly there is the great concern that not only do many of us have default accounts—and we are placed with a default superannuation account often by nothing more than the tick of a box—but, with increasingly mobile gen Y working populations moving between jobs, many have a number of accounts, and not all of them are easily able to be streamlined or merged. That means we have a significant risk of lost superannuation accounts. I do not have to tell this place that everyone is fearful that these small balances—often in accounts either you have lost track of or you cannot close—will be subjected to extraordinary fees relative to the size of the account itself. It makes a certain sort of patronising sense that those moneys should be recouped and held by the Australian Tax Office to seek some protection from those fees but, on the other side of the coin, I think we should be working harder to reunite people with their accounts and let them make their own individual decisions.

I am pleased with where this is heading. I am pleased that the current lost member super account threshold is around $2,000, below which it is transferred to the ATO. That will increase in two phases—at the end of this year to $4,000 and at the end of next year to $6,000. Obviously, when we look at how people get into super, we can see that nearly three-quarters of people are using a default account. At that time these major providers really should be working harder to make sure they keep all the required data to be able to stay in touch with their members and, more importantly, to keep it current and up-to-date. We live in a world now where electronic communication completely dominates and we should not be relying on postal communication. With mobile phones, smartphones and handsets these numbers do not change, particularly for young Australians in the workforce. That number has a very low turnover rate and is likely to remain accurate for years.

The ATO identifies that around 45 per cent of Australians are in this invidious position where they cannot bring all of their accounts together to simplify these arrangements. While the ATO does not charge any fees here, fundamentally, as a conservative government we would rather see people take responsibility for their accounts themselves than fall back on that more patronising notion that we have the ATO going around sweeping up small accounts because it is better for us.

I am glad that we have seen a multipronged approach to having better quality personal information, having a better understanding of mobile populations, working much harder to keep track of people's savings and having up-to-date contact details—something that every entity and agency should be doing. The ATO in particular has a few strategies to reunite members with lost and unclaimed superannuation. These include matching superannuation accounts to an individual and providing this information in an online portal that is easy to access and can be easily promoted, working proactively with super funds to make sure those addresses are constantly updated and, as I said, increasingly using mobile phone numbers to do that. These are three very common-sense measures. The estimated total fiscal impact of $483 million over the forward estimates is not inconsiderable and is further evidence that the coalition is keeping our tax system up to standard.

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

I rise to speak on the Tax and Superannuation Laws Amendment (2015 Measures No. 4) Bill 2015. Whilst rejecting the amendment, I would like to make a couple of points. I will not take the House's time unduly. I would like to concentrate on the same thing the member for Bowman was talking about in relation to superannuation. When I was a kid the idea was that you got a job in one firm and you tried to stay there. Your mum was always telling you to go and get a job for one particular firm and you would stay in there your entire life as you moved up the ladder, because all those middle management jobs were there and you could promote yourself. That would have meant that any for savings you had you would only ever have had to have one bank account and one superannuation account.

As the eighties came along, we found that those middle management jobs kept on disappearing. It meant that, to get to where you wanted to go, you had to continually change employers. When I was doing this in the 1980s and 1990s, I was well and truly a grown-up and able to take care of my own affairs, and still I ended up with superannuation accounts all over the place. I worked a couple of part-time jobs and that sort of thing during my early married life, and I did a couple of things when I started as an auctioneer, doing a bit of weekend work and that sort of thing. I still ended up with all these little superannuation accounts all over the place, and I was in my 30s and reasonably intelligent when it came to these sorts of things. So, when a 15-year-old is coming through and paying into superannuation, there are all these sorts of things that we have to do. You end up with this hodgepodge of accounts and that sort of thing. I think the more we can do to get into that space the better off we will be. The more we can do to simplify it for the end user the better off we will be. The more we can do to simplify the amount of work that a person has to do to take care of their superannuation the better off we will be.

I would like to briefly talk to the House about taxation in general. We are in a situation at the moment where taxes are gathered so that we can pay for services. I have just had a patio put on at my house, so I have spent some extra money. I am not going to keep on spending that, but I have to pay that money back before I can get in there. When a government spends money, it is okay. I believe that there is such a thing as good debt and that it is okay to go into deficit if you are chasing a particular outcome which, in the long term, will pay dividends back to the taxpayer. If you do not have a return on that investment, if you are not able to employ more people and gather more taxes by increased turnaround, you will never get that money back, so what you then have to do is look at measures by which we can claw that money back to get into surplus. If you can get into surplus, you can start paying that money back, and if you can pay that money back then you can start doing stuff that can actually build the community.

These are measures that we have to take, rightly or wrongly and no matter which way we come from. No matter how anyone comes into this place, I think everyone comes into this place with the interests of their own community and the interests of the nation in mind. What we must do is recognise that there are some severe challenges in front of us at the moment and severe headwinds when it comes to trying to balance these books. You cannot just keep on wishing for a system 30. You cannot keep on just taking a system 8 out and hoping that you will pay off all your debts, because it does not work that way. What we have to do is start spending less than we get in, and as a nation we are not prepared to do that.

We have a taxation white paper out at the moment. 'Lower, simpler, fairer' is what we are talking about with taxes: lower taxes, simpler methodology and fairer to everyone concerned. I asked a couple of my friends at home whether they thought that was the right title for a taxation white paper. We were standing around having a beer, and they said, 'It doesn't really matter, because people want to pay no tax, they want more services and they never want to pay it back, and they want someone else to pay.' So that is where the electorate seems to be at the moment, until we as a parliament can turn it around and say, 'Look, we've got to get this thing back into order, because the end result if we don't is disorder and chaos.'

So what we must do is make sure that we get these measures through. These measures here are only $400-odd million worth of repairing the budget, but, when you say 'only $400 million', it is a massive amount of money. None of us here would have to work again if we had that sort of money. But what we must do is start the work together, and we must start the work by building those little bricks and putting those little things in there that we can do. These are sensible measures. These are simplifying our tax measures. These are making it easier for everyone to get around, and at the end of the day those sorts of things must be supported. I back this bill and the Assistant Treasurer, who brought it forward, and I thank the House.

Michael McCormack (Riverina, National Party, Parliamentary Secretary to the Minister for Finance) Share this | Link to this | Hansard source

I rise as well to speak on the Tax and Superannuation Laws Amendment (2015 Measures No. 4) Bill 2015, and I endorse the words of the member for Herbert, who said this is all part of the tax white paper process and all part of streamlining government business to ensure that we enable the people of Australia—the taxpayers and superannuation earners of Australia—to have the best possible way to be able to get ahead in society.

Schedule 1 to the Tax and Superannuation Laws Amendment (2015 Measures No. 4) Bill 2015 amends the scrip-for-scrip rollover rules to ensure that they are better targeted and work as they were meant to work, and that is so important. This measure is an integrity measure which guarantees that opportunities for entities to indefinitely defer tax are taken away. Scrip-for-scrip rollover rules provide tax relief for certain merger and acquisition transactions. They apply where shares or interests in a company or trust are exchanged for similar shares or interests. The tax ordinarily payable at the time of the exchange is held over; it is deferred until the new shares or interests are sold. This decreases the cost of takeovers and mergers, as the acquiring entity does not need to compensate the share or interest holders for tax which would otherwise be payable.

The rollover ensures that tax is not getting in the way of mergers and acquisitions occurring in Australia, and we need to be able to do that. This government is all about making it easier and more streamlined for business activity to occur, and we just heard that from the member for Herbert—getting out of the way and removing the impediments so that we can allow business to get on with the job that they do for themselves, to increase their wealth and prosperity, to make it easier for them to employ people and to get the economy ticking again. We have had one Minister for Small Business since our election on 7 September 2013. Labor had six ministers for this important portfolio in six years. I appreciate this is not the small business minister's legislation; it is the Assistant Treasurer's. But it relates very much to the core priorities of this government: to help business, to build wealth and to encourage prosperity.

Integrity rules in the scrip-for-scrip rollover stop entities from accessing the tax relief in some circumstances — generally where both the acquiring entity and the entity being acquired are run by the same group or individual. A recent court decision, Commissioner of Taxation v AXA Asia Pacific Holdings Ltd [2010] FCAFC 134—the AXA case—highlighted that there were unintended consequences as to how the laws were unfolding in the business world—hence this amendment. The integrity rules were not functioning as intended and were being bypassed. This circumvention was done by temporarily suppressing the ownership rights of related parties through a new issue of instruments. This measure bolsters these rules to ensure entities cannot inappropriately access tax relief via this structure. The tighter integrity rules will be applicable both to trusts and to companies. Further, the measure also changes the handling of some 'downstream' acquisitions which involve the use of debt to reduce tax payable.

These amendments are necessary to guarantee that the rollover cannot be accessed inappropriately, to overcome issues with the use of debt in certain transactions and to ensure that the rules apply to both company and trust restructures. These amendments are deliberately focused and they will have an impact only on those merger and acquisition transactions which inappropriately access rollover relief.

Consequently, it is not anticipated that they will make restructures more burdensome in Australia. We do not want to do that. This measure is not expected to affect small business, and that is vital. As with all government policy, it comes after careful consideration and due consultation. There is an unspecifiable but potentially large revenue protection linked with these amendments, and that is good.

Schedule 2 is about the exemption of income earned in overseas employment. This measure removes an income tax exemption presently being accessed by Australian government employees who are posted overseas for more than 90 days to deliver official development assistance. The intent of this income tax exemption is to provide relief from double taxation, but it no longer has this effect. Instead, it now serves to give a tax break for many Australians who are not liable to pay income tax on their foreign earnings in Australia or in the overseas country.

In the 2009-10 budget the former Labor government had tightened the eligibility for this particular exemption. This income tax measure will go one step further by ensuring that all government employees who deliver official development assistance overseas are subject to Australian income tax on their pay and on their allowances. This change will take effect from 1 July next year. This change does not apply to the taxation arrangements for private sector aid workers or charity workers, who do such a valuable job; we recognise that. It does not apply to Australian Defence Force and Australian Federal Police personnel, who, we also recognise, do a fantastic job, as do Public Service employees. The existing eligibility for an income tax exemption on income earned while working overseas will continue for the groups I just mentioned—the ADF, the AFP. This amendment was announced in the 2014-15 budget and it will result in a gain to revenue over the forward estimates of $6.7 million.

The schedule 3 small lost member account threshold measure raises the current lost superannuation account balance threshold below which small lost superannuation accounts must be transferred to the Australian Taxation Office. This measure was initially announced by Labor in the 2013-14 budget; however, as with so many other things, so much other legislation, whether through incompetence or procrastination Labor did not legislate the measure. On 6 November 2013 the then recently elected coalition government announced it would enact the measure as part of a broader announcement about previously announced but unlegislated tax and superannuation measures.

Mr Husic interjecting—

We hear the member for Chifley interjecting, but he knows that there was so much unenacted legislation that Labor talked about and did media releases about but never did anything else about—never brought it into the House, never brought it into the Senate, never brought it on for debate. That was because they knew it was bad policy or they merely procrastinated. That happened so often from 2007 to 2013.

Dr Leigh interjecting—

At present—the member for Fraser can be quiet too; he needs to listen up; he might learn something—lost member super accounts containing less than $2,000 must be transferred from superannuation funds to the ATO as unclaimed superannuation money. This measure will increase the $2,000 threshold in two phases—firstly, to $4,000 from New Year's Eve this year, and then to $6,000 from 31 December next year. This is good policy. It is sensible. It is overdue legislation. Lost super is a super account held by a super fund where the fund has lost contact with the member, or the account has been idle for more than five years.

When we look at how people get into super, we know that around 70 per cent of employees are members of the default fund which is offered by their particular employer. When many people change jobs, and we hear that people these days will change their jobs up to seven times in their career lifetime—some of the Labor members after the next election might need to start looking around for a new job, because they will certainly need a new job after the next election—

Opposition members interjecting—

I can hear the cacophony of noise. I have obviously struck a nerve there, as they realise their short term in this place. But, when people change jobs, they often end up with a new super account and they fail to consolidate existing accounts. As a result, many people end up with more superannuation accounts than they want or they need. The ATO says nearly half of all working Australians—45 per cent in fact—have more than one super account. In many cases, members are not even aware that they have lost super accounts. They do not know. They are not aware of it. Superannuation is one of those things where a lot of people, whilst it is very important to them and very important to their future, are not aware of how much they hold, let alone of how many accounts that they might have. For super accounts with smaller balances, the costs of fees and charges and insurance premiums can pass the actual investment returns. This can be especially problematic for lost super accounts, because, in the majority of cases, the members are not even aware, as I stated before, that they actually even have these accounts and can end up losing money which was meant for their retirement. Transferring lost super accounts with low balances to the ATO helps to protect such accounts and preserves their value until they can be reunited with their rightful owner, the particular member. The ATO does not charge any fees for maintaining these accounts. Individuals are able to recoup their super money from the ATO at any time. Members are paid interest calculated in accordance with the consumer price index when their money—and it is their money—is reclaimed.

In the 2015-16 budget the government announced six measures to reduce red tape for superannuation funds by removing redundant reporting obligations and streamlining some of the lost and unclaimed superannuation administrative arrangements. These include updating the definition of 'uncontactable' to account for contemporary forms of member communication (for example over the internet, online); supporting eligible rollover funds proactively consolidating lost accounts; and allowing direct payments of lost super held by the ATO to persons with a terminal illness. These changes will make it easier for individuals to be reunited with their lost and unclaimed superannuation moneys. This is reasoned, measured and compassionate.

Opposition members interjecting—

This government is about being reasoned, measured and compassionate, member for Jagajaga. The ATO has strategies in place to reunite members with lost and unclaimed superannuation accounts and to reduce the number of unnecessary and inactive accounts in the superannuation system. Some of the strategies are matching superannuation accounts to an individual, providing this information on an online portal, and proactively working with super funds to ensure they have updated contact details for lost members. There is an estimated total fiscal impact of $483.9 million over the forward estimates. I commend the original motion to the House.

Bob Baldwin (Paterson, Liberal Party, Parliamentary Secretary to the Minister for the Environment) Share this | Link to this | Hansard source

Firstly I thank those members who have contributed to this debate. The Tax and Superannuation Laws Amendment (2015 Measures No. 4) Bill 2015 is part of the government's plan to modernise and update Australia's tax and superannuation laws. The bill makes three changes: two to our tax law and one to our superannuation law. The two tax changes are part of the government's concerted effort to make our tax system fairer and more robust. We want to make sure that everybody pays their fair share of tax and that there are no loopholes in our tax system that allow an unfair advantage to some over others. These two tax changes are integrity measures that will remove the ability of certain companies, trusts and individuals to obtain an unfair tax advantage that was never intended for them. This will make our tax system harder to circumvent and more sustainable for the future. The superannuation amendment in this bill is about making sure that people's superannuation money is protected from erosion by fees and charges, including insurance premiums, so that it is available to them when they retire. These three amendments demonstrate the government's commitment to tax and superannuation systems that are fairer, more sustainable and more robust.

Schedule 1 to this bill will improve the integrity of the rules that deal with scrip for scrip rollovers. The rules apply where shares or interests in a company or a trust are exchanged for similar shares or interests as part of a merger or takeover. The tax payable on the disposal of the original interest when it was exchanged is deferred. Special integrity rules exist to ensure that tax relief is not provided where an entity has a controlling interest in both the entity acquiring and the entity being acquired. This schedule strengthens those rules to ensure that they operate as intended. These new rules overcome a decision in the full Federal Court of Australia which highlighted that there were problems with the rules that allowed entities to access the rollover in circumstances which were outside the policy intent. Schedule 1 to this bill will amend the special integrity rules to ensure that these rules cannot be bypassed, by changing certain definitions and introducing new integrity rules which target the inappropriate deferral of tax. It also ensures that equivalent rules apply to trusts.

The second amendment in this bill, schedule 2, will eliminate an income tax exemption for certain government employees who work overseas. This income tax exemption is available to certain groups of Australian residents, including government employees who deliver official development assistance for more than 90 days. The exemption was originally designed to make sure that Australians were not subject to double taxation on their foreign employment income; however, it no longer serves this purpose. Instead it now acts as a tax break for some government employees, who are able to avoid income tax altogether. This income tax exemption was never intended to provide full relief from income taxation, so it is currently providing an unintended benefit to eligible Australians. This bill will ensure that government employees who earn income while delivering official development assistance will be liable to pay income tax in Australia. This amendment will not affect defence or police force personnel or employees of private sector or charity organisations delivering official development assistance. This tax change will commence from 1 July 2016 and result in a gain to revenue of $6.7 million over the forward estimates.

The third and final amendment in this bill will help ensure that lost member superannuation accounts with small balances are not eroded by fees, charges and insurance premiums, which can often exceed investment returns on such accounts. Generally lost super is a super account where either the fund has lost contact with the member or the account has been idle for more than five years. Transferring these lost super accounts with low balances to the ATO helps protect them from fees and charges, including insurance premiums, and preserves their value until they can be reunited with the member. The ATO does not charge any fees for maintaining these accounts, pays interest calculated in accordance with the consumer price index and ensures that the electronic process to reunite members with their lost super accounts is quick and easy. Currently, lost member super accounts with less than $2,000 must be transferred from funds to the ATO as unclaimed superannuation money. This bill will increase the $2,000 threshold in two phases—first to $4,000 from 31 December 2015 and then to $6,000 from 31 December 2016. The threshold increase recognises the significance of protecting superannuation savings for the purpose of retirement income.

This measure, as well as the two tax measures contained in this bill, will modernise our tax and superannuation law and make the overall system fairer and more sustainable for all Australians. It is not fair for some companies or individuals to obtain a tax benefit that was never intended to be there in the first place. And it is not fair that money put away into superannuation for a person's retirement is not protected and available to them when they finally reach retirement. That is why this bill will remove unintended tax benefits that have arisen and protect the superannuation accounts of those with low balances. These important changes will result in a fairer and more sustainable system. I commend this bill to the House.

Bruce Scott (Maranoa, Deputy-Speaker) Share this | Link to this | Hansard source

The question is that the amendment be agreed to.

Question negatived.

Original question agreed to.

Bill read a second time.