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

The Treasury Laws Amendment (2017 Measures No. 2) Bill 2017 makes changes to the measures enacted through the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016. The changes are technical in nature and aim to support the integrity of last year's superannuation measures and to ensure the law operates as intended. As such, Labor will be supporting the bill.

The changes include amendments, first, to ensure that self-managed superannuation fund members cannot circumvent the use of the new cap on tax-free retirement phase assets through the use of limited recourse borrowing arrangements; second, to ensure people who receive compensation orders as a result of suffering a serious or catastrophic injury do not have their structured settlement or personal injury order, or the earnings on those, counted towards the transfer balance cap, regardless of when the contribution is made; and, third, to clarify arrangements in relation to the transition to retirement income streams. We understand that many of the changes in the bill are to address issues raised by the superannuation sector following the changes introduced last year and that they have support within the sector.

The bill also amends the Bankruptcy Act 1966 and the Corporations Act 2001 to address two issues arising from the Insolvency Law Reform Bill 2015, which the parliament passed with Labor's support in early 2016. Those two issues are, first, to allow a single approval from creditors to cover a profit or advantage received by an external administrator or trustee, even when they are received by multiple related entities, where currently an approval would be needed for each of the relevant entities; and, second, to require annual and end-of-control returns by controllers to continue to be included on ASIC's public register. Under the Insolvency Law Reform Bill 2015, this requirement would have ceased on 1 September 2017. This bill reinstates this requirement, as the Fair Entitlements Guarantee Recovery Program relies on access to controller records to determine whether controllers have complied with their statutory obligations. These changes to the Corporations Act and the Bankruptcy Act will reduce legal complexity, increase certainty for insolvency practitioners and remove unnecessary costs from insolvency proceedings. The amendments also assist the Fair Entitlements Guarantee Recovery Program in its work reclaiming funds paid out under the program.

While this bill is technical in nature, it is worth noting that its effect is to clean up the mess of the government rushing its superannuation changes through last year. While Labor has had a clear and considered position on superannuation changes, the government has flipped and flopped, at one point arguing that no changes to our superannuation tax concessions system were required, then ultimately giving in to community pressure to adopt the view—which had long been taken by Labor—that our superannuation tax concessions are not fair and not sustainable.

When we look at the poor economic record of the Howard-Costello government, we see one of the reasons for that record was the structural deficit, which the IMF has noted, that was run in the later period of the Howard-Costello government. That structural deficit was in part due to overgenerous and unsustainable superannuation tax concessions given disproportionately to high-income Australians. The decisions made by John Howard and Peter Costello were fiscally reckless and utterly unsustainable, and it is those reckless decisions by a previous coalition government which this parliament has had to wind back.

When those opposite talk about the extraordinary economic achievements of the Howard-Costello era, they frequently refer to the razor-thin surpluses that were run in those years. But when you look at the structural budget position, it was significantly worse. As the IMF has noted, this was a period of particularly poor financial management. Reining in those superannuation tax breaks required significant public debate. Of course, somebody who enjoys a tax concession is often reluctant to give it up. But it simply was not sustainable to continue in a situation in which our superannuation tax breaks were so skewed to the top of the distribution.

The principal purpose of superannuation must be to reduce the chances that Australians end up on the pension. The benefit to the community of building a large pool of national savings when the owners of those savings are well ahead of pension eligibility stage is fairly limited. Superannuation should not be used to try somehow to address housing affordability, as the government has done in this budget through the notion that young Australians, if they want to get into the housing market, should have to raid their superannuation. Superannuation needs to be about maintaining the sustainability of the pension. Superannuation tax breaks going disproportionately to the top end are not in accord with fundamental principle of superannuation. So we are pleased that the government has steadily come towards Labor's view on superannuation, but because so much this was done in a hurry and done without consultation, because the government's proposed lifetime cap on non-concessional contributions raised significant concerns in the community about retrospective changes, then the government got it wrong. That is why we are debating this bill today—because it is cleaning up the mess of the superannuation changes last year.

In substantive terms, Labor has called for additional changes to improve the fairness of our superannuation system. Bill Shorten spoke to the National Press Club last August—

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

The member for Fenner can refer to members by their correct titles.

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

I thank you for that wise correction, Mr Deputy Speaker. The Leader of the Opposition spoke to the National Press Club last August, making clear that Labor will not tie the $500,000 lifetime cap back to 2007, but our changes would apply from budget night. That means that Australians who had invested in good faith based on clear rules would not be punished after the fact, nor would they have to go back through the laborious process of piecing together financial decisions. He also said that Labor would lower the threshold for high income superannuation contributions from $250,000 to $200,000. Those measures, at the time the Leader of the Opposition addressed the National Press Club in August last year, were costed by the Parliamentary Budget Office to improve the budget by $238 million over the forward estimates and by $4.4 billion over the decade, delivering more budget savings but no retrospectivity.

That again is an indication of Labor's strong support for sensible superannuation reforms. Labor engages with the community. We consult carefully and we do not put forward the sort of rushed and haphazard changes that the government has done, which have led to this cleaning-up bill that the House is debating today.

Matt Keogh (Burt, Australian Labor Party) Share this | Link to this | Hansard source

As the member for Fenner has just explained, Labor will be supporting the Treasury Laws Amendment (2017 Measures No. 2) Bill 2017. It is largely technical in nature. The clear thing that comes from this legislation is that the reason it is here today is to clean up the mess that this government had already made last year when rushing through its changes to superannuation law. The government has clearly been a disaster when it comes to superannuation. In last year's budget are the government announced its planned changes to superannuation. 'Planned' is probably a bit euphemistic here. They included tax breaks which we were told would reduce reliance on the age pension. It was, in a way, another example of what has been dubbed 'Labor light'—a good Labor idea, but under this government it did not go far enough and was badly implemented.

However, half of those superannuation tax breaks would still go to the top 20 per cent. The government's Financial System Inquiry found they were unlikely to be relying on the age pension. So the government's backbench and its donor base opposed the measures put forward, such as a $1.6 million transfer cap, the $500,000 lifetime non-concessional cap and the $25,000 concessional cap that they believed would have had adverse effects. These changes were announced in the 2016 budget with no consultation. There was no prior conversation about what government intended to change and how. Implementing these proposed changes was done in a hurry. Even the superannuation industry had serious concerns that the number of people affected by the transition to retirement changes could be five times larger than the estimates that the government had given. The coalition faced the consequences of bringing forward proposed changes to people's retirement savings without having done any proper consultation whatsoever.

After months of internal division—it sounds pretty similar to now—and debate the government eventually had to revise its package. Lo and behold—the damage had already been done, and confidence in the superannuation system had been undermined because of the way this government had handled changes it wanted to make to superannuation. In November last year the government did eventually pass a watered-down version of its proposed changes. After its own budget a significant backlash was heard, not just from a broad cross-section of Australia, but from its own base as well. So the government has been especially cautious now in its treatment of superannuation. But, of course, having lacked a consultative process in bringing forth changes to superannuation and rushing through legislation to try to make it happen, once its party room had sort of agreed on where it was going to end up, they botched it. So we find ourselves here today having to deal with some technical changes to make sure that we can fix up the problems that they created in their own 'plan' because they rushed it through.

I think this is something that we must take note of in this chamber, because at the moment we see a government going through the throes of the same things again when it comes to energy and climate change policy in this country—marathon party room meetings, big debate across the party room, clear divisions emerging, multiple views being expressed on different television channels and interviews, and concerns about leaking from the government and the party room. We have seen this before. We saw it only a few months ago in reality when it came to superannuation. It does cause us quite a degree of alarm because, at the end of the day, we are having a discussion about the complete lack of policy focus on the other side when it comes to energy and climate change, and the lack of certainty that is currently being provided to industry as a result of the lack of policy focus of this government.

It is as a consequence of that that we have seen underinvestment in energy in this country, which is causing a large number of the problems which the government are complaining about. They are driving themselves into exactly the same problem now in the area of energy and climate change that they did under superannuation. We could see it writ large in the behaviour of this government only a few short months ago. Certainty is such a critical factor in the area of climate change and energy policy in this country that we do not want to have the government bring forward some rushed version of legislation after having not properly consulted, after having division in their party room, and then months later having to come back again only to fix it all because they botched it the first time. It is writ large from the behaviour of this government through all of their activity to date, and I think the Australian people need to take note that those on the Treasury benches right now cannot be trusted when it comes to technical reform, whether it is on superannuation or whether it is on energy and climate change policy. It is of grave concern to people on this side of the chamber, and it should be of grave concern to the Australian people. That is why, as a responsible party, the Labor Party will support this legislation to make sure that the system that the government have proposed to introduce works properly. But let us take note: we need to make sure that we do not see these problems manifest again in other areas of law reform such as we can see unravelling right now before our very eyes when it comes to things like a CET.

Tim Hammond (Perth, Australian Labor Party) Share this | Link to this | Hansard source

I rise, firstly, to wholeheartedly endorse the previous comments of my good friends, the member for Burt and the member for Fenner. I also rise to agree to support this bill, the Treasury Laws Amendment (2017 Measures No. 2) Bill 2017, as is made clear by Labor's position. But I would also like to unpack a couple of key themes that we see that are symptomatic in relation to not only this bill but also the conduct of this current government insofar as seeking to fix up mistakes that could have easily been avoided and which, quite frankly, do not do service to fundamentally important parts of policy that shape the way we as everyday Australians go about our lives these days.

I cannot help but note that I was only in this chamber last night speaking on amendments to the Native Title Act. We see key themes as to what went on in relation to the Native Title Act as we do in this bill—on simply groundbreaking pieces of legislation that fundamentally shifted the dial in the way in which government has the potential to shape and mould community expectations and community standards. I start with the Native Title Act, a landmark piece of legislation introduced by a Keating Labor government in 1993 which saw for the first time the appropriate level of recognition to Indigenous Australians in relation to officially setting aside the concept of terra nullius, as the court did in the Mabo decision, and creating a framework in which we recognise in this place rights and entitlements of Indigenous Australians over land with which they have an ongoing connection.

What we saw in relation to the amendments to the Native Title Act was a cack-handed, ham-fisted, rushed attempt to try to cure an issue that anyone could have seen coming well before the crystallisation of the judgement of the full Federal Court in the McGlade decision. It came in here too quickly. It came in here under the guise of appropriate consultation when that was clearly not the case. Then when it went up to the other place it took four attempts to shape that legislation into something that was actually going to be not only workable but acceptable to Indigenous Australians in terms of giving them stability insofar as upholding pre-existing ILUAs.

What do we see from this government in relation to the Native Title Act? We see the theme of a fundamental reform introduced by a Labor government back in the day. We see from this government a lack of consultation and a rushed attempt to try to fix up something which could have been remedied if the proper level of thought and consultation had gone into it in the first place. Then there is a clumsy attempt to play catch-up football in relation to simply getting it right, particularly in the context where we see a proposition which fundamentally has bipartisan support.

Here I am, not 24 hours later, standing to make the same observations in relation to this bill. What do we see here? Back in 1992 a Keating Labor government introduced groundbreaking reforms which for the first time created a framework of compulsory superannuation contributions. We saw a Labor government, or good government done well, responding to the needs of the community to try to future-proof the standard of living to make sure that mums and dads all around this country had a reasonable base level of financial security upon retirement. It was a fundamental and groundbreaking reform. What we see here is, again, a patch-up job of which the fundamental substance is noncontentious. This does sound familiar. But I am rising to reflect the fact that what we have here is an endemic problem with this government in terms of its ability to deliver something right the first time that has been properly thought through and that does not require us to run around chasing our tails in order to remedy a situation which was clearly capable of resolution if done properly the first time.

In relation to those key themes, I would like to touch upon a topic that is the subject of this amendment that might not otherwise be so apparent when you look at the fact that what we are dealing with here is fundamentally a financial services bill—the Treasury Laws Amendment (2017 Measures No. 2) Bill 2017—seeking to make changes in the area of sustainable superannuation. It is an area that is fundamentally important, and I commend the government for doing so. I say that in relation to the way in which this bill treats lump-sum payments that are awarded to victims of catastrophic injuries. This is a really good thing that we see here in that the government has taken steps with which we agree to make sure that those people, men and women, who have catastrophic injuries have their compensation orders that are awarded to them as a result of those injuries not counted towards the transfer balance cap regardless of when the contribution is made. What we see here is to make sure that the lump sum or the structured settlement payment awarded to a victim of catastrophic injury is not subject to further instability in relation to the treatment of that award insofar as a superannuation component is dealt with.

I take this opportunity to echo the statements of the member for Riverina in the second reading speech on this bill in relation to changes to the treatment of structured settlements and personal injury orders under the transfer balance cap to make sure with these amendments that people who receive compensation orders of this nature as a result of suffering a serious or catastrophic injury are exempted from the transfer balance cap as intended. This will ensure that those who need access to large amounts of funds to meet their daily healthcare and living needs will not face a faster depletion of their lump sum.

And I will just pause there to lay out to this House from firsthand experience how important that amendment is and why, in this case, the department and the government are doing good work. I know they are doing good work because in a life before this life I spent much of my time representing victims of catastrophic injury. To look on a firsthand basis at how irrevocable the life changes are for these people, imagine going from a life of ability, a life of mobility, a life of independence to a place where all of those things are either impaired or taken away altogether. There are very few things in this life as dramatic as the impact of a catastrophic injury, not only on that person but also on their family.

Just imagine a situation in which one day you are at the breakfast table with your family, going about your daily business, with thoughts on your mind about how the day will unfold, how you are interacting with your community, what is going to be for dinner, who is looking after the kids, what is happening on the weekend, who is taking the kids to the local sporting events and who is on for birthday parties, and all of a sudden—in the blink of an eye—that is taken away, by a motor vehicle accident or a public liability accident, or an accident that is entirely unforeseen. Imagine that perfectly able, functioning individual literally lying flat on their back without any ability to move their limbs, without any ability to do anything for themselves anymore, as a result of medical negligence or medical misadventure, a motor vehicle accident or a workplace injury. The result is horrendous.

There is very little in this world that has the ability to shift the dial on one's hopes and dreams like a catastrophic injury does. And if that were not bad enough—if living with the impact of having all of that independence taken away were not enough—the question then becomes a rather clinical and grim analysis of what that is actually worth. For someone who is cut down in the prime of their earning life with a catastrophic injury that leaves them completely immobile, that can be worth millions and millions of dollars in terms of an appropriate level of compensation that goes some way—but never far enough—towards putting that person back in the position they would otherwise be in but for that catastrophic injury. For someone in the prime of their earning life who would otherwise be required to run a busy household as well, it is quite foreseeable that that amount of money could be in the range of $10 million to $15 million.

The issue in relation to that, and the reason we join the government in agreeing with the substance of this bill—particularly as far as its catastrophic injuries provisions are concerned—is that that amount of money has to last these victims for the rest of their lives. And it is not only for their own lives; it also needs to last long enough to in some way compensate for the lack of earnings coming in to the entire family—leaving aside the pain and suffering and loss of enjoyment of life. Life has changed enough for these people; life is unstable enough for these victims. They do not need the uncertainty of knowing that this nest egg—which, if they are injured in their 30s or 40s, quite foreseeably has to last them for another 30 years—could be eroded or the subject of instability if this amount of money was not ring fenced from the transfer balance cap.

So, for the sake of certainty and for the sake of stability for those who have had their lives irrevocably altered, these changes are so important. These changes—which may in one sense seem somewhat benign or somewhat technical in nature—will make a difference. These changes will add at least some degree of comfort and certainty for those who are catastrophically injured, when so much of their life is anything but comfortable or certain, and that is important. That is why, for many reasons, this bill should be agreed to.

But in my remaining time speaking on this bill, let me complete the circle, if I may, with a concern. The concern relates to the pattern of conduct that we have seen, and that I have raised at the start of my remarks, in relation to both native title and superannuation. I hope and pray we do not see in this place from this government any further rushed, ill-conceived or ill thought out amendments or changes to groundbreaking, reforming, community-building legislation that makes a difference to people's lives. The subject matter of this bill segues into that type of reform in relation to the certainty created for those who have significant disabilities or catastrophic injuries, who are otherwise protected by the National Disability Insurance Scheme. Again, this place saw a degree of bipartisanship in relation to the implementation of the National Disability Insurance Scheme, but, like the compulsory superannuation and native title reforms of the Keating Labor government, the National Disability Insurance Scheme was fundamentally a creature of Labor government. That is important to all of those who suffer significant physical or mental impairments and who need and deserve support in relation to simply managing those impairments, which almost exclusively have occurred through no fault of those victims.

I would hate to see this government make any alterations, or do anything, without an appropriate level of deliberation and forethought as to how it may affect stability and certainty for those who suffer significant and permanent physical and mental impairment. Labor has always been the party of big reform, big change and big ideas. We have seen it with native title, we have seen it with superannuation and we have seen it with the NDIS. As long as improvements are practical and sensible then we will back them, but we will not support rushed legislation which will not benefit this community.

Josh Frydenberg (Kooyong, Liberal Party, Minister for the Environment and Energy) Share this | Link to this | Hansard source

Firstly, I would like to thank those members who have contributed to this debate.

Schedule 1 of this bill introduces changes to support the integrity of the superannuation taxation reform package and ensure that it operates as intended. The superannuation taxation reform package was passed by parliament in November 2016. It is the most comprehensive suite of superannuation taxation reforms in a decade, delivering on our commitment to improve the fairness, sustainability, flexibility and integrity of the superannuation system. In the process of implementing the superannuation taxation reform package, concerns were identified about the ability of self-managed superannuation fund members to circumvent the new cap on tax-free retirement-phase assets through borrowings. From 1 July 2017 a transfer balance credit will arise where there is a repayment of the principal and interest of a limited recourse borrowing arrangement that has the effect of shifting value from the accumulation phase into the tax-free retirement phase. This will support the integrity of the superannuation tax reform package by ensuring that the targeting of tax concessions is not undermined. The changes affect the ability of SMSFs to enter into an LRBA where the member has already reached their transfer balance cap and wishes to finance the LRBA through a transfer of accumulation funds to the pension phase.

Schedule 1 also makes a number of minor and technical amendments that will ensure that the package operates as intended. These changes will be welcomed by industry. With changes to clarify that pooled superannuation trusts that are eligible for superannuation relief to improve outcomes for recipients of a structured settlement or personal injury order as a result of a serious or catastrophic injury, and to clarify the treatment of transition to retirement income streams when a member has satisfied a nil condition of release, these measures will improve the operation of the superannuation tax reform package to ensure it achieves its objective of a fair, more sustainable and more flexible superannuation system.

Schedule 2 of the bill refines changes made to personal and corporate insolvency law by the Insolvency Law Reform Act 2016. The passage of this schedule will lower compliance costs for insolvency practitioners and companies under administration and ensure that the Fair Entitlements Guarantee Recovery Program can access the information it needs to reclaim funds paid out under the program. This schedule amends a prohibition introduced by the Insolvency Reform Act which may be interpreted as creating unnecessarily high compliance costs. The prohibition prevents insolvency practitioners deriving a profit except as approved by the Corporations Act 2001 or the Bankruptcy Act 1966. This schedule clarifies the operation of the prohibition and removes the requirement for creditors to approve a single profit or advantage each time it is on-paid to a related entity of the practitioner—including, for example, payments made to the practitioner's employees in the ordinary course of their employment. These amendments will reduce costs without weakening the prohibition's intended protective purpose. The schedule also repeals a provision inserted by the Reform Act that would inhibit the Fair Entitlements Guarantee Recovery Program's work of reclaiming funds owed by insolvent companies to their employees. The amendments in the schedule present refinements to existing law. Though minor, the amendments will be welcomed by insolvency practitioners, creating certainty and efficiency while maintaining the positive effect of previous reforms to insolvency law.

I commend the bill to the House.

Question agreed to.

Bill read a second time.