Kim Carr (Victoria, Australian Labor Party, Minister for Innovation, Industry, Science and Research) Share this | Hansard source

I would like to take this opportunity to thank those senators who contributed to this debate and indicate that schedule 1 of the Tax Laws Amendment (2010 Measures No. 1) Bill 2010 delivers on the government’s 2007 election commitment to introduce an optional superannuation clearing house service that will be free of charge to eligible small businesses—that is, those with fewer than 20 employees. Senator Fielding would be interested in these remarks, because I think they directly address his concerns. This measure will reduce the red tape burden on small businesses. In particular, it will remove the need for small business to deal with numerous different superannuation funds where their employees elect to exercise choice and, consistent with the government’s election commitment, it will enable small businesses to discharge their superannuation guarantee obligations once the payment is received by the clearing house. The measure has been welcomed by the Council of Small Businesses of Australia as well as by a range of other industry bodies, including the Investment and Financial Services Association and the Association of Superannuation Funds of Australia, who described the measure as ‘the most significant first step in lowering administrative costs for employees’.

The government’s decision to provide a small business clearing house service through Medicare Australia was not taken lightly. The decision had regard to a number of factors. The key consideration relates to the government’s commitment to offer small businesses the certainty of being able to discharge their superannuation guarantee obligations on payments to the clearing house. A responsible approach to policy design required attention as to how to deal with this particular risk. This included thinking about what happens when something does go wrong, rather than just naively trusting that things will go right. Therefore, the discharge of the super guarantee liability at the clearing house has an important bearing on the design of the measure. It is the view of the government that if you do that—and this is a very important part of our election commitment—the best way of meeting that obligation and ensuring the security of employee funds is through the delivery of a service through Medicare. Delivering the clearing house service through Medicare Australia will minimise these risks in comparison with the provision through a commercial operator, ensuring that small businesses can discharge their super guarantee obligations on payment to the clearing house. Medicare Australia has a significant payment processing capacity, processing over 562 million services annually to the value of $35.8 billion. Medicare Australia is able to leverage its existing infrastructure and capabilities while ensuring the privacy of information and simultaneously ensuring the security of funds. Moreover, this is a measure that will be fully funded from the budget and will not require Medicare to draw on its existing resources.

The government accept that there are a number of private sector operators who believe they can deliver this service. However, it is not incumbent upon the government to deliver a solution which suits one particular segment of the superannuation industry. We have a duty to develop public policy in the interests of the whole nation—small businesses and employees as well as superannuation industries more generally. The government’s selection of Medicare is a responsible approach which will deliver significant compliance cost reductions for small businesses while removing any risk to employee superannuation entitlements while they are held by the clearing house.

The Senate Standing Committee on Economics has recommended that we consider that the threshold value of 20 employees be monitored over an initial period of three years. The government welcome this as a sensible recommendation. However, for the reasons that have already been outlined, the government will not consider enabling a commercial operator to provide this service on the same terms as Medicare, particularly in respect to discharging super guarantee liabilities.

The opposition has raised concerns about the government not tendering the service to the private sector and about the so-called anticompetitive effects of the selection of Medicare. It needs to be recognised that the significant segment of the market which are targeted by these measures involves employers with fewer than 20 employees. They are currently not extensively serviced by existing clearing house providers. This has been borne out in the evidence given by the superannuation industry participants to the Senate committee.

The relatively low use of the clearing house services by smaller businesses could be due to a number of factors, including that it may not be commercially attractive for existing operators to provide services to such small businesses. But the willingness and capacity of smaller businesses also needs to be considered when it comes to the issue of actually paying for the service. Whatever the reason, the measure contained in this bill is designed to address the gap that currently exists in the market by offering a free, no-strings-attached clearing house service to eligible small businesses, and I urge the opposition to support this important initiative. I am sure Senator Sherry, who is now here, will be able to deal with any other matters in the context of the committee stages of the bill. I commend the bill to the chamber.

Question agreed to.

Bill read a second time.