Chris Bowen (McMahon, Australian Labor Party, Shadow Treasurer) Share this | Link to this | Hansard source

The Treasury Laws Amendment (2018 Superannuation Measures No. 1) Bill 2018 includes four measures: a one-off 12-month superannuation guarantee amnesty to encourage employers who have not paid their employees the SG to do so; allowing employees who have multiple employers to apply to the tax commissioner for an exemption certificate from the SG for one or more of their employees, so as to avoid breaching the concessional contributions cap; ensuring that the non-arm's-length income rules for superannuation entities apply in situations where the superannuation entity incurs non-arm's-length expenses in gaining or producing the income; and amending the total superannuation balance rules to prevent self-managed super fund members from being able to use limited recourse borrowing arrangements to circumvent the $1.6 million transfer balance cap and the unused concessional carry forward rules.

We have no problem with three out of the four measures contained in this bill and have no problem supporting those measures through both houses. Avoiding a breach of the concessional contributions cap, the non-arm's-length income rules and the limited recourse borrowing arrangement changes are sensible provisions and we support them. But we have a very fundamental problem with the first measure—the amnesty for employers who have not paid their workers the superannuation guarantee.

Let me be very clear: superannuation is the member's money; it is the employee's money. Superannuation is a condition of employment. It is part of an individual's remuneration. Not paying the superannuation guarantee is wages theft. Not paying the superannuation guarantee is theft from your employees. It should not be provided with an amnesty. If anything, it should be provided with greater penalties for noncompliance. This amnesty would be a penalty holiday for people who had not provided the superannuation guarantee for up to 25 years. Somebody who has never paid the superannuation guarantee to their employees would be able to benefit from this amnesty. This is a serious problem.

There have been various mechanisms to look at this problem. There was a Senate Economics Committee inquiry into superannuation guarantee nonpayment. It made a series of recommendations—some of which the government supports and some of which we support, but most of which were good-faith sensible recommendations. What was not recommended was an amnesty. At no point did the Senate committee recommend an amnesty. The Turnbull government's own Superannuation Guarantee Cross-Agency Working Group did not recommend an amnesty.

This government is making changes that will mean that an employer could have kept superannuation entitlements from an employee for more than 25 years and now will not face any penalty at all if they pay it back. Usually when an employer does not does not meet their superannuation guarantee requirements—and it is found that they have not paid it; it's reported—there are two things that happen: a superannuation guarantee charge is levied, and that is not tax deductible if the superannuation guarantee charge is levied in that circumstance; and additional penalties of up to 200 per cent of the amount of the superannuation guarantee charge can be levied. The government's proposed amnesty will have the effect that the employer in question will be able to claim a tax deduction for the superannuation guarantee charge and avoid penalties. So they are going to make it tax deductible and take the penalties away. Honourable members might recall that we asked the Prime Minister about this in question time a few weeks ago. It was quite clear that the Prime Minister had absolutely no idea what we were talking about. He was unaware that this was his government's policy. It was one of the more embarrassing question times. Although today might have surpassed it, it was a pretty embarrassing question time for the Prime Minister.

We have a fundamental issue with this. I would say that over my 14 years in this House I would have seen—as many honourable members certainly on this side of the House would have seen—scores of people who have not been paid their superannuation guarantee and who have been at their wits' end about how to get their employer to pay their superannuation guarantee. You work with those people and you refer them to the tax office. A lot of women are affected by this in lower-paid, precarious employment, and employers think that they have the whip hand over those employees and that they don't have to pay the superannuation guarantee. It is a big problem. We're not talking about a few people. The Productivity Commission's draft report on superannuation estimates that, conservatively, there is $2.8 billion a year in unpaid superannuation. They did a model simulation of somebody aged between 21 and 25 whose employer did not pay 50 per cent of contributions and would have a retirement balance of $63,000 less than somebody who got all of their contributions, and, if they didn't get any of their contributions at all, they'd be self-evidently close to $120,000 behind. What we do not believe is that an amnesty is an appropriate way to deal with this issue.

If an employer has legitimate reasons, if an employer has made a very legitimate administrative mistake—there's been a natural disaster and their systems have been affected in some way—then, of course, people would understand, but not when an employer has knowingly engaged in theft from their employees and has knowingly engaged in noncompliance with the law of the land. This parliament legislated that the superannuation guarantee should be universal and compulsory, and 'universal and compulsory' means it should be paid to everyone. It's not an option. There are certain workplace conditions in this country which are not optional anymore. Workplace health and safety rules used to be optional. This parliament and state parliaments have improved working conditions. Working hours are regulated; conditions are regulated; there are obligations on employers and employees. You don't pick and choose. It's not a smorgasbord of what you're going to comply with or not going to comply with.

The government could look at the issue of superannuation guarantee noncompliance and say, 'Well, we could increase penalties, we could look at the Senate committee recommendations and we could look at the recommendations of our own working group. We could do all of those sensible things. We could engage with the opposition and we might get a bit of bipartisanship. This is a very serious issue and the opposition are very interested in working with people, with goodwill, across the board to try to fix it. We could do all of those things.' But, no, what does the government do? With no warning, with no indication of any consultation with anybody—certainly no public consultation—and with no process of draft legislation, they simply say, 'We're going to let people off. We're not going to enforce the law of the land.' It's been the law of the land for 25 years. 'We're not going to require employers to pay the superannuation guarantee of their employees. If they haven't, we're going to provide them with a penalty holiday. We're going to make it tax deductible and we're going to waive the penalties.'

This is, frankly, appalling. This is just an appalling piece of legislation. This legislation is an affront. It's an affront to the House and it's an affront to the hardworking Australians who deserve a dignified retirement. We are not talking about luxury; we are talking about people, often on low incomes, who, the parliament decided, under a Labor government, deserved a dignified retirement by having some money put aside for them from every pay packet for their future retirement, and it was legislated. I recognise and accept that the Liberal and National parties opposed that legislation. They opposed compulsory universal superannuation. They argued against it. They said it was a con job. They said we shouldn't have dignified retirement. They said superannuation should be kept the preserve of the few. That's what they argued when the Keating government legislated for compulsory universal superannuation. They made that argument and they lost, and it has been the law of the land for 25 years, like it or not.

The parliament should be saying to everybody, 'If you breach the law, there's a consequence. If this parliament passes a law, we expect it to be complied with.' That's how the system is meant to work. You can't pick and choose which laws you comply with. This is a government who say they're tough on law and order. They lecture us about the people they don't like and how we should be tough on unions and they hold royal commissions, but, if you have an employer who's not complying with the law and is ripping off employees, that's okay—'We're going to let them off.' Well, it's not okay and it won't be okay if we have anything to say about it in this House or the other House. We don't think that this should be the law of the land—that all of a sudden it's optional as to whether you comply with the superannuation guarantee. There is a difference of approach here. The Andrews government in Victoria has announced that it will criminalise wage theft. The Foley opposition in New South Wales have announced that, if they're elected, they will criminalise wage theft in New South Wales. Yet this government says superannuation theft is just fine. Just fine. No penalties. No reason to comply with the law. Don't worry about it.

This amnesty applies for 12 months, but it applies retrospectively for 25 years. What's to say that, when this 12-month period is over, the government's not going to do this again in a few years time? This legislation sends all the wrong signals about the importance of the superannuation guarantee. It sends all the wrong signals about all the wrong priorities of this government. I move:

The motion was unavailable at the time of publishing.

The final point refers to an announcement that the Leader of the Opposition and I made some time ago, that we would actually implement the recommendations of the Murray inquiry into limited recourse borrowing in relation to self-managed superannuation funds. There are some measures in this bill that we support, but the government should go further. They should accept the recommendations of their own inquiry, the Murray inquiry into financial system, as well. I can feel that the honourable gentleman here, the member for Scullin, is very keen to second the amendment. I commend the amendment to the House, and I hope the government sees sense and actually thinks that the law of the land should be complied with, implemented and policed.

Ross Vasta (Bonner, Liberal Party) Share this | Link to this | Hansard source

Is the amendment seconded?

Andrew Giles (Scullin, Australian Labor Party, Shadow Assistant Minister for Schools) Share this | Link to this | Hansard source

I'm very pleased to second the amendment, and I reserve my speaking rights.

Ross Vasta (Bonner, Liberal Party) Share this | Link to this | Hansard source

The original question was that this bill be now read a second time. To this the honourable member for McMahon has moved as an amendment that all words after 'That' be omitted with a view to substituting other words. The immediate question now is that the amendment be agreed to.

Ted O'Brien (Fairfax, Liberal Party) Share this | Link to this | Hansard source

The Turnbull government is committed to the financial security of all Australians. This was acutely evident in 2018 budget handed down last month, a budget that builds on a strong economy—an economy now in its 27th consecutive growth year. It's a budget that supports Australian businesses to grow and capitalise on global growth. Global growth is now the fastest in six years. It's a budget that continues to create jobs, to build on last year's average of 1,100 extra jobs every single day. This is a budget that plans for the future and the future prosperity of all Australians.

An essential part of that planning is to ensure all Australians have adequate retirement savings courtesy of our superannuation system, a fair superannuation system with reliable measures and enforcement regimes to protect the hard-earned savings of all Australians—measures such as placing a cap on superannuation account fees and a ban on exit fees; changing life insurance in superannuation from being a default option to an opt-in option for those who have low balances or have not received a recent contribution, or those under the age of 25; giving the ATO greater powers to consolidate lost superannuation accounts into active accounts; and compelling superannuation funds to provide more information to help consumers compare and choose products that best suit their needs.

The Turnbull government is introducing a suite of measures to further protect our hard-earned savings and help ensure that all workers get their full superannuation guarantee entitlements, and this bill does just that. Firstly—and this is important—this government will provide a 12-month superannuation guarantee amnesty for employers to voluntarily come forward to remedy historical nonpayment of their workers' superannuation. Those who fess up, those who cop it on the chin, those who voluntarily come forward and make good on historical nonpayments will not face the usual penalties. But here's the kicker: if they miss their chance, those employers who do not fess up will be found out and will face higher penalties.

It is expected that $230 million in retirement savings will be recouped for some 50,000 hardworking Australians under this superannuation guarantee amnesty. Some will argue, including the opposition—and we've heard it already from the shadow Treasurer—that this measure is in some way weakening penalties for noncompliance. Nothing could be further from the truth. How the shadow Treasurer, how the Labor Party, how the union movement could stand in the way of 50,000 Australians recouping their own hard-earned savings is beyond belief. There is no weakening. This is simply an incentive for employers to come forward voluntarily to pay all historical entitlements, with interest, in full, to employees.

This measure will deliver a real difference to the savings, financial security and retirement plans of at least 50,000 Australians who would otherwise miss out on a combined $230 million in superannuation entitlements if it were not for the amnesty proposed by this bill. Any suggestion, as the shadow Treasurer implied, that this is letting employers off the hook is patently untrue and wrong. Employers will only get the benefit of the amnesty if they pay their employees' entitlements in full and with interest and if they voluntarily disclose their noncompliance—that is, they aren't already under investigation by the ATO. Here we have $230 million that can be given back to those people, those 50,000 hardworking Australians, who have actually earned it for their savings, and who stands in the way right now? The Labor Party and the union movement. The very people who purport to represent hardworking Australians are the ones standing in the way of $230 million being returned. It's an absolute disgrace.

Secondly, this bill recognises that some employees may inadvertently breach their concessional contributions caps when they have multiple employers contributing to their superannuation. This bill streamlines the process and allows employees to opt out of the superannuation guarantee system by applying to the ATO for an exemption certificate to avoid such breaches. Once an exemption has been granted, employees can negotiate higher take-home pay in lieu of these contributions, if they so wish. Once again, this measure will provide a practical solution to a very real problem and, thereby, make a real difference to the financial security of Australians.

Thirdly, this bill protects the integrity of the 2016 superannuation taxation reform package. I remind the House that this package was supported by the opposition. The changes before us today will ensure that super funds cannot evade contribution caps by using non-arm's-length expenditure to enhance their total income. This bill also ensures that limited recourse borrowing arrangements aren't used inappropriately to access concessional cap carry-forward arrangements, or to circumvent caps on non-concessional contributions. These measures improve confidence in the system and ensure it is fair, equitable and used for its core purpose: to provide income security in retirement, whatever one's circumstances.

Those opposite don't have a good track record when it comes to the security of Australians' retirement savings. I do not need to remind the House, or the Australian people for that matter, of Labor's plans to abolish dividend imputation credits and increase capital gains tax as part of their so-called tax plan. As the Institute of Public Affairs astutely points out:

All 15 million prospective retirees who hold a superannuation account stand to be affected.

My electorate office has been contacted by hundreds of constituents, many elderly and meagre of means, all worried about their retirement savings and superannuation balances should Labor ever win government. Some of them were in fact traditional Labor voters, many of whom were pained to concede that the Labor Party had no idea of what it was doing. We know those opposite are very keen to immediately raise the superannuation guarantee rate in a historic low-wage-growth environment, even in the face of warning of their own so-called experts—the Grattan Institute, for example—that it would affect the retirement savings of Australians, particularly low-paid workers. In fact, under a Labor government, the superannuation guarantee rate was projected to increase to 11½ per cent at the end of this month.

And who pays for these increases? The employees pay for these increases with less take-home pay. There is less disposable income for workers—that's what Labor delivers, and Labor knows that. I really believe those opposite understand that their tax plan is going to adversely impact hardworking Australians. But they were happy, and they remain happy, to see that happen. The Leader of the Opposition knows that all too well himself, because he admitted it back when he was Minister for Financial Services and Superannuation, during an interview with Neil Mitchell on 3AW in 2012. Neil Mitchell says:

Okay. So you're saying that the superannuation increases will be paid for by absorbing money out of the wage increases.

Bill Shorten, member for Maribyrnong, says:

That's the evidence.

Neil Mitchell says:

So I won't get a wage—I won't get any more in my back pocket. It will go into super, right?

Labor simply cannot be trusted with the retirement savings of Australians. Even rusted-on Labor voters in my electorate of Fairfax are waking up to that. Labor simply can't be trusted to manage the economy, let alone look after older Australians.

The measures before us today, as outlined in this bill, provide for a stronger, fairer and more equitable superannuation system—a system that is sustainable and better aligned to its core purpose as a reliable, long-term investment and savings regime that gives Australians a secure retirement. And to that end, I commend the bill to the House.

Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Assistant Minister for Treasury) Share this | Link to this | Hansard source

This bill, the Treasury Laws Amendment (2018 Superannuation Measures No. 1) Bill 2018, includes four measures. The first is the one-off 12-month superannuation guarantee amnesty to encourage those employers who haven't paid their employee super to do so. The second allows employees who have multiple employers to apply to the tax commissioner for an exemption certificate from the SG from one or more of their employers. This helps to avoid breaching the concessional contributions cap. The third ensures that non-arms-length income rules for superannuation entities apply in situations where a superannuation entity incurs more arms-length expenses in gaining or producing the income. And the fourth amends the total superannuation balance rules to prevent self-managed super fund members being able to use limited recourse borrowing arrangements to circumvent the $1.6 million transfer balance cap and the unused concessional cap carry-forward rules.

The three latter amendments have merit, but Labor is certainly opposed to the first principle in this legislation of providing an amnesty for employers who have not been paying their workers the superannuation guarantee. It is clear that what the government is doing with this is basically letting dodgy employers off the hook from prosecution for breaking the law. There is a well-enshrined law in Australia that has been in place for the last 25 years that says employers are obliged to pay superannuation once they're above certain thresholds. And this government now wants to give those employers who have been breaking the law a free pass. You can get away with breaking the law under a Turnbull government because they'll give you an amnesty for it in respect of not paying superannuation.

It shouldn't be a surprise that this government has consistently supported big business and corporations over workers, which is what they're again doing with this particular aspect of this legislation. The fact is that this government is more concerned with the ideology of removing regulations on big businesses and giving handouts to big businesses through their corporate tax cuts than actually ensuring that people are paid properly, that people are paid legally, as they should be, under legislation. Instead of cracking down on bosses who have clearly done the wrong thing, the government is handing out leave passes. It wants to give employers who have not paid superannuation to their employees for 25 years a penalty holiday—that's right, 25 years, a quarter of a century. So you can be an employer who hasn't paid your employees' superannuation for the last quarter of a century and you will get away with it under this government. Imagine if the average taxpayer or the average small businessman didn't pay tax for a quarter of a century and then just rocked up to the Australian tax office and said: 'They're letting the employers off from paying superannuation. How about you give me a break. I'm not going to pay back any of the tax that I haven't paid to the government over the course of the last 25 years.' You would be laughed out of town—and so you should be.

But when it comes to superannuation, those bosses who haven't been paying superannuation for the last quarter of a century will get a break and be free from prosecution. That says everything about this government's approach to big business and their approach to superannuation. We all know that they've never really supported superannuation. They don't believe in the philosophy of compulsory superannuation contributions. They certainly don't believe in industry funds. At every opportunity they reduce the number of people who pay into industry funds and reduce the mechanisms to put people into industry funds. They oppose them. Superannuation theft is as bad as wages theft—and it is illegal. Why should dodgy employers get away with stealing hard-earned money from their employees? Why should employers who have ripped off their workers be given a tax break when the Australian average worker or small business isn't when it comes to paying their fair share of taxes?

This government just can't help themselves when it comes to giving more to business at the expense of Australian workers. And it is a common theme. For too long they ignored Labor's push for a royal commission into the banking industry. Their history on this has already been written. The evidence shows that the Turnbull government continues to get this and other big calls wrong when it comes to financial services regulation and acting in the interests of workers, families and small businesses. They even shut down calls to action on a royal commission from their own backbench. Calls to action from the likes of Senator Williams have been coming from their party room for many years. For 600 days they said there was no need for a royal commission. Given the evidence that has been given before the royal commission so far, Labor has been completely vindicated in our calls for a royal commission.

And here we are with an amnesty for dodgy employers, a surprise announcement that was made without consultation. It came completely out of left field with not a mention at all to the industry, to workers or, indeed, to the opposition. There was no mention of it in the budget. It was presumably a decision that was taken but not yet announced.

There are no recent parliamentary reports into unpaid super that actually recommend such a measure. The superannuation guarantee amnesty wasn't recommended by the Senate Economics Committee when they looked at superannuation and nonpayment. They conducted an inquiry into this, and they didn't even recommend it. Neither was it recommended by the government's own superannuation cross-agency working group, and recent reports of the announcement on the amnesty was a surprise even to the industry—peak organisations like the Association of Superannuation Funds of Australia, ASFA, the Financial Services Council or Industry Super Australia.

It is clear that the Turnbull government decided this at the last minute. It was decided by the minister as another break for big businesses that haven't been paying the right amount of superannuation for their employees. They didn't even bother to consult with key stakeholders in the industry. They will always place ideology above effective policy.

Usually, when employers don't meet their superannuation guarantee obligations, they can be liable for penalties and charges: the SG charge, comprised of the SG shortfall, nominal interest and a $20 per employee per quarter administrative component. Penalties can be up to 200 per cent of the amount of superannuation guarantee charge that is not paid.

There are general interest charges where the SG charge or penalties are not paid by the due date. Under the government's proposed amnesty, the administrative component of the SG charge and the penalties would be waived as well. Even worse, the SG charge and contributions offset against the SG charge would become tax deductible for employers, so dodgy employers get a tax break for doing the wrong thing. Yes, it's another unfair, undeserved tax handout from this government to large corporations.

The Prime Minister is out of touch. You've got to laugh at the hypocrisy of the Prime Minister coming in here and saying that Labor has been out of touch when it comes to economic policy and tax policy. We are the ones opposing the big tax cut for large companies, which is overwhelmingly opposed by the Australian public, particularly Australian workers, who haven't been getting wage increases for the last decade, really. They can see that it's unfair to be handing out a tax cut for big businesses. Only someone as out of touch as the Prime Minister would be seriously suggesting a reform such as this.

Businesses who do the wrong thing and steal from workers should pay the price for their misconduct, not get another tax handout from this government. When employees steal from employers, they rightfully have the book thrown at them and they are prosecuted. Why is it one rule for businesses and another rule for workers? The government is really saying that it's okay to steal from workers but it's not okay for employees to steal from their bosses—as it shouldn't be; no worker should ever steal from their boss. But this government is going to allow employers to steal from their workers.

Unpaid super is a massive problem across Australia. Recent estimates point to 2.4 million workers losing about $5.6 billion in superannuation payments each year. That's equal to those workers losing $2,000 per year; that's money that should be going into their retirement savings. Superannuation is part of a worker's pay and conditions and every worker deserves the right to superannuation that they are entitled to.

I just wish to finish with some final comments about the limited recourse borrowing arrangements. Schedule 4 of the bill amends the total superannuation balance rules that were introduced as part of the government's 2016 super reforms. The changes in schedule 4 are integrity measures to ensure that—in certain circumstances, involving LRBAs—the total value of a superannuation fund's assets is taken into account in working out individual members' superannuation balances.

Let's not forget that in 2014 the Financial System Inquiry recommended that super funds not be permitted to use LRBAs at all. They observed:

Further growth in superannuation funds' direct borrowing would, over time, increase risk in the financial system.

So, unfortunately, the government rejected that inquiry recommendation. Labor announced that we would prohibit this, as part of our housing affordability. This will prevent the unnecessary build-up of risk in Australia's superannuation industry. Labor created superannuation and will always defend it, and that's why we support the three other measures in this bill but we can't support the measure which allows wages theft from employees.