Helen Coonan (NSW, Liberal Party, Manager of Opposition Business in the Senate) Share this | Hansard source

I rise to support the Temporary Residents’ Superannuation Legislation Amendment Bill 2008 and the Superannuation (Departing Australia Superannuation Payments Tax) Amendment Bill 2008 as they are important, much needed reforms to the way that superannuation accumulated by temporary residents is treated when they leave the country. The purpose of the first bill, the Temporary Residents’ Superannuation Legislation Amendment Bill, is to require superannuation funds to pay the unclaimed superannuation of departed temporary residents to the Tax Office. The purpose of the second, related bill, the Superannuation (Departing Australia Superannuation Payments Tax) Amendment Bill, is to enable departed temporary residents to claim their superannuation benefits through the existing departing Australia superannuation payment process before it becomes unclaimed. These bills are necessary because of the increasing number of unclaimed superannuation accounts from departed temporary residents, including backpackers and other temporary residents.

According to the Australian Taxation Office’s 2006-07 annual report, the number of unclaimed or lost superannuation accounts is over 6 million, equating to over $12 billion remaining unclaimed. Whilst compulsory superannuation has served workers in Australia very well, one of the downsides has been that because of the complexity of the way the system operates a number of people have lost money that they have legitimately earned. Whilst this money is still available to them if they come back to claim it, it is often the case that they do not know about it, are simply unsure about how to claim it or, indeed, are unwilling to claim it because the amount of administrative time spent chasing an often small amount of money from overseas is just not worth it.

It was the previous Howard coalition government that had the foresight and wisdom to seek to change the legislation to clean up the system and stop these problems from occurring. The then coalition government announced in the 2007-08 Mid-Year Economic and Fiscal Outlook that these reforms would be implemented by 1 July 2008. However, the legislation did not pass because of the federal election. The Rudd government continued with this legislation but deferred its commencement to allow for more time for consultation. The coalition will be supporting this legislation because it was initially our proposal last year, and we welcome this legislation’s improvement to the current arrangements.

I will now go briefly to the specifics of the bills. When these bills come into force, superannuation funds will be required to pay to the Taxation Office any unclaimed superannuation balances of any temporary residents who have not claimed their benefit within six months of leaving Australia. Superannuation is currently concessionally taxed because of the acceptance of the principle that retirement savings are a public good that should be encouraged. Under current arrangements, when a temporary resident leaves Australia they can apply for their superannuation balance to be paid as part of a departing Australia superannuation payment, or DASP. Departing Australia superannuation payments attract a 30 per cent withholding tax for the taxed element of a benefit and a 40 per cent withholding tax for the untaxed element.

Under the scheme proposed in these bills, the Australian Taxation Office will be required, after a six-month period, to advise superannuation providers that a former temporary resident with a superannuation account has departed Australia. The superannuation fund will then be required to remit to the Taxation Office the balance of the superannuation account less any benefits that have already been paid. After the balance has been transferred to the Australian Taxation Office, the departed temporary resident may apply to make a claim for the Australian Taxation Office to pay their benefit to them, their legal representative or, indeed, another fund if they again return to Australia. The Australian Taxation Office will then be required to pay the balance, less any applicable withholding tax payable. Effectively, this means that six months after leaving the country a departed temporary resident will have to apply for their DASP through the Australian Taxation Office instead of the original superannuation fund. This effectively means that it is far easier to track down lost super from the time when someone was, for example, on a working holiday in Australia. This centralised process will be an improvement to the current system whereby there are, as I mentioned a little earlier, 6 million lost accounts, which of course is unsatisfactory from anyone’s viewpoint.

The inquiry of the Senate Standing Committee on Economics into these bills found that they have support, and the committee recommended that the bills be passed by the Senate. Once again, I do want to commend the serious work done by the Senate Economics Committee. They have a huge workload and always produce reports of a consistently high standard in relation to these often quite complex bills. Because they are referred to in the report, I will only speak very briefly about a couple of minor issues that were brought to the attention of the committee.

The coalition senators on the committee noted that this bill will automatically force benefits to be transferred six months after the temporary resident either leaves Australia or his or her visa expires. Even if the person is actively managing their account—that is, staying in touch with their fund—under this legislation, at the six-month mark their account will be closed. There has been a call for the government to do more to promote awareness amongst people leaving Australia that they are able to claim any superannuation that they have accumulated. The fact that there are six million lost accounts suggests that we have not done as well as we could in informing departing residents of the process for claiming the DASP they are entitled to. I accept that this is a difficult challenge. I faced it myself many years ago, and it is obviously still a significant issue. I would ask that the minister in his remarks in his reply indicate to the Senate what additional plans he may have in mind by way of an information campaign to better inform departing temporary residents. I make these remarks not critically but simply to note that existing mechanisms are not having the desired effect and some better mechanisms need to be employed.

According to the Bills Digest, the financial consequence of the bill is a net positive increase in the underlying cash balance of the Commonwealth over the forward estimates. These bills will help to streamline the claims process for lost superannuation and will remove the compliance burden caused by inactive accounts. This, as I mentioned a little earlier, is an original coalition initiative. I think it is a very worthwhile improvement that has been proceeded with by the current government and I am pleased to commend this bill to the Senate.