Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Hansard source

On the first argument that Senator Ludlam presented, the concept of means testing and the principle of means testing does apply widely through a range of social security and tax measures. But the government will not support this amendment.

In opposing the amendment I want to explain some of the practical difficulties. Although the means test may apply at the opening of the account—let us say that you were earning $30,000 today and you opened the account—an individual’s circumstances can and almost certainly would change in terms of their income over, say, the four years that they contribute to the account. Their pay may go up or their pay may go down. In fact, it is highly likely that their pay would go up over that four-year period because their employment and income circumstances would have changed.

If we were to adopt a means-test approach to the first home saver accounts, the consequence of that would be that the ATO would obviously have to monitor every individual’s change in income—and there would be a lot of people whose income would go up, and some would go down. Then it would have to make an adjustment to the government contribution, based on the means test. Administratively this would be extremely cumbersome. I know you have not designed the schedule of the phase-out of the contribution, or perhaps a phase-up of the 15 per cent contributions tax treatment, but, if you were to do that, implementing this, with individuals’ incomes going up in this way, on a medium-term savings account would administratively be very complex. We believe that on this particular account it is impractical and administratively very difficult.

The second issue that leads on to is that we would have to disclose this. A disclosure document will be issued to the individual when they open up the account. You would have to explain the means test and the way it would operate. In law you have to do that at the moment and, frankly, on this type of product I think it would be very difficult to explain to an individual the detail and the interaction of the means test. Even if you did and they read the disclosure document and understood it when they opened up the account, two or three years down the track I suspect it is unlikely that they would recall the details of the means test, and their pay will have gone up. Then they will look at their account and see that the government contribution has changed. They will say, ‘Why has the government reduced my contribution?’ They will not recall the details of the means test.

So whilst I am generally supportive of the means-testing approaches, in this case it adds very significantly to administrative complexity and disclosure complexity. This is a four-year savings horizon, and we believe that if you introduce this approach it would also have the adverse impact of reducing the take-up of the accounts. For example, for those who wanted to save over a shorter time frame than four calendar years, it would adversely impact on the take-up. They may want to save, I think, technically, over four financial years so in terms of calendar year time you could contribute at a minimum two financial years and two days—and I would have two double-check that. We just believe that, firstly, in terms of the administration of this and the impact, there would be very significant compliance costs and, secondly, the disclosure requirements and the variable impact on the government contribution and/or the tax treatment would certainly not be appreciated or understood one year, two years or three years down the track when the individual looked at their account and saw a different contribution from the government this year compared to, say, the last, and this would be the case even if it had been understood initially through reading the disclosure document. So for those reasons we are not supporting the means test of the first home saver account.

I have one final point, and it is a technical point. You remember Senator Ludlam was trying to insert a second section 131. I am advised that if this were successful—and I understand that the opposition are not supporting it—it would need to be redrafted in order for it to have any practical effect. I know that this government is keen to facilitate the passage of legislation and provide assistance—and if there is a technical issue that you believe needs some assistance, we are happy to provide that technical assistance—but, notwithstanding that, we cannot support the amendment.