Andrew Bartlett (Queensland, Australian Democrats) Share this | Hansard source

I want to speak to just a couple of issues surrounding the Tax Laws Amendment (Simplified Superannuation) Bill 2006 and its 10 related bills which were raised during the Senate Economics Committee inquiry into the bills and have also been raised with me by a number of constituents. Before I do that, I would like to reinforce the key role the Democrats have played over the years in strengthening Australia’s superannuation system and being pivotal in the development of the superannuation system in Australia. It is probably fairly fashionable these days to deride my Queensland Democrat predecessor Cheryl Kernot, but she played a key role as a Democrat senator in the formulation and expansion of the superannuation system under the former Labor government. That is a positive legacy of hers that is still being felt today, and I think it should be acknowledged.

More recently, the Democrats played a key role in negotiating constructively with the current government, as we often attempt to do, in developing a massive expansion in the amount of assistance for low-income earners in maximising their superannuation savings. As part of that, quite wisely, we required regular quarterly reports to be tabled in this parliament about the amount of money being provided to low-income earners through government payments as supplements to their superannuation contributions. The amounts that have been provided to supplement and expand the superannuation savings of low-income earners have proven to be much larger than was originally anticipated. I am fairly sure it now goes well past the $1 billion mark of extra money that is in the superannuation savings of many thousands of Australian low-income earners. Those are just a couple of examples amongst many of the constructive, very important and direct legacy of the Democrat contribution to our superannuation system.

My colleague Senator Murray has spoken to this particular legislation at some length, so I will not go over some of the points that he raised. If I were still in a balance of power position in this chamber I would insist that much more detailed costing projections be provided by the government. I appreciate these things are always an estimate, but when you are making changes of this magnitude there should be at least some effort to project the longer term costings and the scenarios and cameos for different people in different circumstances.

The failure of the government to do that work and to provide those projections is pretty sloppy, frankly. It is the sort of thing that has happened more and more since the government got control of the Senate. That shows that having an independent Senate that can properly review what the government is doing is not just a matter of saying, ‘That’s bad policy and we’ll stop it,’ or, ‘That’s bad law and we’ll stop it’; it is actually a matter of ensuring that the job is done thoroughly and properly the first time around. Even if you support a policy intent, there is a big difference between just letting it roll through without proper examination or proper work being done and looking at it in the necessary detail to make sure, as much as possible, that you get it right the first time and that you have a broad idea of all of the potential effects. The flow-on, long-term effects of all of these changes are hard to predict in lots of ways, but that does not mean that you cannot do a bit of work trying to do so.

A specific area I want to touch on is detailed in chapter 3, I think, of the Senate committee report and relates to the tax on additional assessable income, particularly the way some of these changes interface with the situation for people in military service schemes. The committee report—and it was unanimous on this matter, as I understand it—noted possible inequities associated with members of taxed and untaxed schemes who receive assessable income in addition to their superannuation benefits. One submitter suggested that these changes result in a further inequity for many individuals who have other sources of income or who receive higher superannuation pensions, because it taxes the residual end benefits tax at marginal rates rather than subjecting it to a separate 15 per cent flat tax.

For members of tax schemes receiving a superannuation income stream, additional income is taxed at a marginal rate from a starting point of zero. This category of recipients is therefore able to take advantage of the tax-free threshold and the overall progressiveness of the income tax system when tax is calculated on their additional income. Pension recipients from untaxed funds are taxed at marginal rates and additional income earned by these fund members is combined with their superannuation income stream to determine their assessable income. Consequently, more tax is paid on this additional income by those in untaxed schemes than those receiving a benefit from a taxed scheme. The committee came to the view that this was an anomaly that applies inequitable tax treatment to the same type of assessable income and urged the government to reconsider the way in which total taxable income is classified for those in untaxed schemes.

This links to some extent with concerns specifically relating to the Defence Force Retirement and Death Benefits Scheme. These were also touched on in the Senate committee’s report. The concerns that have been raised with me by a number of veterans relate to the way these benefits are being excluded from the new schemes on the basis that they were untaxed and unfunded. Certainly, some contributors to the scheme state that they did contribute a portion of their salary to the scheme. It was a taxed portion under a compulsory 5.5 per cent contribution, and for a period the government did make a co-contribution of 11 per cent until this scheme was changed.

A number of veterans argued in their submission to the committee that the Defence Force Retirement and Death Benefits Scheme should be considered as at least partly funded so that they could have some of the benefits available to other superannuants. I note that Treasury officials—and I think the Treasurer himself—indicated a commitment that veterans would not be paying more tax under the proposed new regime. But the fact remains that, under this proposed new regime, a lot of other people will be paying less tax and these veterans will not. So there are certainly some grounds for the concern that was expressed, reflected in the view put forward by the committee. The report said:

The committee recognises the unique circumstances in which veterans find themselves. Military personnel rarely have the opportunity to work until the usual age of retirement, especially given the inherent physical risks associated with serving in the ADF. Further, as a consequence of military service many former ADF members are left incapable of undertaking further employment.

That is a factor relating to service in the defence forces that I have spoken on a number of times in this place before. We should realise that it does not just apply to veterans—people who are wounded in action in the theatre of war. Being in the Defence Force is an inherently risky business in general. There are many people injured in peacetime whether in non-warlike service or as part of their day-to-day activities in the ADF.

I have spoken a number of times about how I believe on many occasions, although not all, we are still not adequately assisting ex-service personnel whether they be war veterans or other ex-service personnel who have been injured or wounded in the line of duty. The committee indicated its sympathy for the financial circumstances of veterans, particularly those unable to work. But—and I am paraphrasing here—it indicated the view that, whilst there was some understandable concerns being expressed by those veterans with respect to the treatment of the Defence Force Retirement and Death Benefits Scheme, it did not believe that this was the best place to fix it up. The report stated:

... the committee is not persuaded that the tax free treatment on benefits should be further extended. However, the committee strongly encourages the government to examine the adequacy of financial protection that military superannuation schemes provide for incapacitated ADF members, particularly in comparison with other public sector superannuation schemes.

The committee felt that, if veterans are at a relative financial disadvantage due to the inadequacy of their military superannuation funds, redress should not occur through special tax exemptions. In the committee’s view, this would negate the purpose of the legislation and potentially create other inequitable treatment for people facing the same hardships by different circumstances. I can understand the view the committee has put. They basically said, and I am paraphrasing, ‘We agree that some of you are in an unfair position, but this process is not the best way to fix it.’ That is probably correct. But the problem is that, when you are the person in the unfair situation, particularly if you are a veteran or ex-service person, a statement like, ‘Yes, we agree you are getting a bit of a rough trot but this isn’t the best way to fix it; we need to convince the government to do something else,’ is the sort of thing they tend to hear time and time again. Even though this might not be the best way to fix it through the mechanism that is suggested, it does redouble the obligation on government to seek to fix it. It is cold comfort to have your concern acknowledged and then be told that you have to find another way to address it. I think that on all sides of politics we need to be particularly cognisant of the unique type of contribution that Defence Force members make, particularly those who have been injured and those whose injuries are sufficiently severe that they are unable to work again.

Generally speaking, politicians like to wrap themselves in the flag. They like to hang out at military parades, give out medals, be at services, wave off troop ships, welcome them back home and all those sorts of things, but, when it comes to the ongoing day-to-day treatment for those service personnel for the rest of their lives, it often tends to be governments that are the ones missing in action. We need to be doing a lot better in that regard. I think it is doubly important given some of the willingness to use political rhetoric to encourage and promote military activities around the place.

I want to take the opportunity to put that on the record and particularly to urge the government to take into account the committee’s recommendation No. 4 regarding the separate assessment of superannuation income streams and additional assessable income and also the committee’s view regarding the treatment of people in military service schemes. One of the things that can happen with committee inquiries into legislation—unlike committee inquiries into policy areas where governments are meant to provide responses to the various recommendations—is that there is often very much a feeling that, once the legislation has been dealt with, recommendations that do not directly relate to the legislation just disappear into the ether.

Having said that, the government’s record of responding to any committee report is spectacularly appalling, especially since they have gained control of the Senate. It seems like other people’s views no longer need to be even acknowledged let alone responded to. But these are important issues; they were unanimous findings of the committee. I think it is particularly appropriate that the efforts to redress some of the concerns be redoubled, for both the unique aspects of the tax treatment of benefits and, more broadly, the continuing difficulties that many ex-service personnel face.