David Bushby (Tasmania, Liberal Party) Share this | Hansard source

I rise to contribute to the debate on the second reading of the Temporary Residents’ Superannuation Legislation Amendment Bill 2008 and the associated bill, the Superannuation (Departing Australia Superannuation Payments Tax) Amendment Bill 2008. The overall objective of the bills is, as I understand it, to address the situation where superannuation earned under the Compulsory Superannuation Guarantee requirements by temporary residents is left indefinitely unclaimed in super funds. The first step in doing this should be to do what is reasonably possible to ensure that those who actually own those superannuation funds have the opportunity to access them. Beyond this, where it is not possible to reasonably ensure temporary residents are reunited with their superannuation and they lose contact with it, I think it would be reasonable to take steps to consolidate that super into consolidated revenue.

The detail of this legislation will have the effect of gathering all moneys held by temporary residents in super accounts in Australia out of those accounts once they have been gone for six months, regardless of the wishes of those people, the degree to which they remain in contact with the super funds, whether they are actively managing their Australian super funds or even whether they have voluntarily deposited sums themselves into their super accounts on the understanding that they can invest it in Australia until they reach retirement age. The legislation contains no provision to try to ensure that these people are aware of amounts they might have deposited into super accounts before leaving or to make it easier for them to claim them. The only notification that they get is a question on the departure card as they are getting on the plane to leave.

This legislation does contain some concerning aspects and could come at a significant cost to Australia, to Australians and to our ability to attract talented people to work and study in Australia. As always, the devil is in the detail. The proposed legislation presented by the government has attracted strong and, in some cases, very reasonable representations from stakeholders highlighting a number of legitimate concerns, many of which appear to have been brought to the attention of the government and subsequently ignored. Effectively, what the bills do is as follows. Once a temporary resident has left the country for six months, or it is six months after their visa has expired, all funds paid into their super funds whilst earning in Australia will be paid into consolidated revenue to be used without restriction by the government. This is the case regardless of whether those funds were paid into super funds as part of the superannuation funds guarantee requirements or as voluntary contributions over and above those requirements. It is the case regardless of whether the owner of those funds knows they are there, remains in direct contact with the relevant super fund or is actively managing those funds. There is no requirement that those funds be ‘lost’ in the sense that the fund managers have lost contact with the owner.

Of course, the owners of those funds can access them upon the leaving the country—if they are aware of the existence of those funds, are able to understand and complete the relatively complex paperwork and are able to provide the proof required. But, even if they can, they will be required to pay an increased departing Australia superannuation payment of 35 per cent of the total amount in the fund. I do not have any issue with people being required to pay what is effectively a penalty tax on early access to their super; it is an appropriate thing. The money was paid into their super account on a concessional basis, and if they access it earlier it is right and proper that they pay a penalty. But this increased penalty tax, when combined with the 15 per cent contributions tax, gives a flat rate of tax paid on those funds of around 50 per cent. It applies even to people who have made voluntary contributions to their super funds on the expectation that they could withdraw it upon turning 60 on the same terms and conditions that apply to Australian permanents turning 60. It is worth noting that such individuals will end up paying a higher rate of tax than if they had taken that money as a cash salary.

It is important to remember that for some temporary migrants their time in Australia may well have been the only opportunity that they have had to save for their retirement and that they did so based on the then legislation. An additional issue is that, once the ATO has gathered up these people’s money into consolidated revenue, no earnings or indexation are to be applied while funds are held by the ATO, even if they hold them for 20 or 30 years until their owner retires and remembers that they have some superannuation that they earned whilst working in Australia all those years ago. What they will get if they actually do access it at that point is the exact amount paid in less the 15 per cent contributions tax and less the 35 per cent DASP. There will be no indexation, no interest and no dividends. The timing of the measures imposed by the bill has also been raised as problematic, and it seems to me that it is a probably a legitimate issue. Super funds have submitted that it is unrealistic to require them to provide the first report on temporary residents to the ATO by April 2009. One industry group estimated that the cost of trying to implement the measures across the industry in accordance with that time line could be up to $100 million. I do not know what the actual cost will be, and that remains to be seen. But it is apparent to me that there would some additional cost in trying to meet the deadline.

Suggestions were also made at the Senate Economics Committee inquiry hearing that not enough is being done to ensure that temporary residents are put in contact with their super before they leave the country and that education and awareness campaigns or direct contact through immigration would help address this issue. One suggestion by the student representative council of the University of Sydney—and I note that Senator Hurley mentioned some of their recommendations; all of them were good—was that, when those temporary residents on working visas apply to open a superannuation account, the visa holder must declare their visa and supply a domestic and overseas address. Once the final tax return is lodged and/or persons known to be on a temporary visa have not made a superannuation fund payment for six months, the fund could directly contact the person with information about temporary residents and their right to take their superannuation with them when they leave Australia, along with the application form to make that possible.

Other options exist to ensure that the owners of these funds are better informed about their existence and their rights over them, but of course exercising these options would necessarily decrease the overall quantity of funds available to the government, and hence they are probably not an attractive option. One solution to most of the problems in this bill would be to provide the possibility of giving temporary residents a choice to opt out of the relevant provisions of this bill in circumstances where they can demonstrate that they are actively aware of their Australian super funds and in contact with their fund provider. This would enable temporary workers who move base or other temporary residents who may return to Australia to retain their superannuation investments in Australia until they choose to claim them—subject to a penalty if before retirement age and on the same terms as any Australian if at or after retirement age.

These proposed changes to superannuation do not just affect temporary residents in an immediate sense but could affect Australia’s ability to attract and retain skilled workers. They could act as a disincentive to our attracting skilled and unskilled workers to fill demand needs and capacity constraints in Australia. The principle behind this bill is good and should be supported, and this is the reason why the coalition is supporting it, but to me some aspects of the bill do raise issues of concern that I think could be addressed.