Katy Gallagher (ACT, Australian Labor Party) Share this | Hansard source

I welcome the opportunity to make a contribution on the Treasury Laws Amendment (Fairer and Sustainable Superannuation) Bill 2016 on the Superannuation (Excess Transfer Balance Tax) Imposition Bill 2016, which have taken a while to get here this morning. I think over the last few months, particularly since budget night, we have seen a very messy policy process from the government, which started with the announcement of these budget measures back in May. Within days of these measures being announced on budget night the unrest was evident within government ranks. The retrospective changes undermined confidence in the retirement system and sparked what we all saw as a very unseemly civil war inside the Liberal party. I think it is worth reflecting on how we got to this point and how much the division within the government over these reforms and this shambolic process have undermined confidence in superannuation.

Back in April 2015 Labor led the way from opposition and proposed its policies to reform superannuation tax concessions. We had done the hard work and put out this policy in time for people to consider and consult on the implementation long before the election was called. The government spent much of 2015 and 2016 arguing against the sensible changes to superannuation concessions that Labor had put forward. Then in the May budget the government announced its planned changes to superannuation. Done in a hurry and without consultation, the government's proposed $500,000 lifetime cap on non-concessional contributions triggered significant concern across the community, the superannuation sector and the media that the government was making retrospective changes to superannuation laws. Yet the government arrogantly ploughed on. In the hurry to an early election, when asked if he could foresee any circumstances in which the policy as detailed in the budget would change following the election, Prime Minister Malcolm Turnbull said, 'It is absolutely ironclad'—a choice of words I am now positive the Prime Minister regrets.

After one of the longest election campaigns of recent times, the divisions within the government became clearer. We saw several members of the coalition raise concerns about retrospectivity and we saw the spectacle of George Christensen MP threatening to cross the floor and oppose the government's budget proposals if changes were not made. We then saw the Treasurer and the Assistant Treasurer travel the country hosting forums with coalition MPs, convincing them and consulting with them over what changes should be made. This is a very unusual process, after the government has delivered its package in a budget. It seems to me that they have gone through the process of outlining what the reforms should be. Having to go and renegotiate these issues with members of your backbench on a national tour, while backbenchers are speaking out against the changes, seriously undermined confidence in the superannuation system. I think we see that reflected in some of the reports we have seen today about the massive drop-off in voluntary super contributions. After this national tour the government eventually announced a revised package which benefits high-income earners and fails to deliver the budget repair that is needed. While the government has now reluctantly scrapped its flawed and retrospective changes, Labor believes the current proposals do not go far enough to return fairness to the system, or to deliver substantial budget repair.

Labor is the party that built our superannuation system—something we on this side of the chamber are very proud of—and it is Labor that will always work to ensure that the superannuation system is fair and sustainable. A system that currently sees half of all superannuation benefits flowing to the top 20 per cent of income earners—with 40 per cent of superannuation benefits flowing to the top 10 per cent alone—is a system that clearly needs reform. The government's package that is before the Senate today goes some way to addressing the issues. Indeed, we do support the majority of the measures that are before us. In particular, we support the continuation of the low-income superannuation contribution. The low-income superannuation contribution, originally a Labor initiative, was to be scrapped by the government. However, we acknowledge that the government has now had a change of heart. When you seek to abolish something and then realise you have made a massive mistake that will significantly affect lower income earners and you realise that the Labor policy was correct, what do you do? You put it back in but you rename it something else so it presents as a new initiative and something that you can take credit for. This is simply a rebadging of the low-income superannuation contribution, now known in this bill as the low-income superannuation tax offset.

There are two areas where Labor proposes changes to the government's legislation. Firstly, Labor believes that the annual non-concessional contributions cap should be lowered from the $100,000 cap proposed by the government to an annual cap of $75,000. Statistics show that fewer than one per cent of Australian taxpayers made $100,000 or more in non-concessional contributions in 2012-13, while over 86 per cent of taxpayers made no non-concessional contributions whatsoever that same year. Many Australians will make a single, large non-concessional contribution at some stage in their working life, for example in the form of an inheritance or a property sale. The superannuation system allows for this by letting Australians bring forward three years' worth of contributions into a single year. But Treasury figures indicate the average contribution for these one-off lump sums is $135,000, well below the $300,000 that would be allowed under the government's plan or the $225,000 under our proposal. By lowering the annual non-concessional contributions cap to $75,000, Labor will ensure the carry-forward allowance remains generous enough to accommodate the kind of one-off contributions middle- and low-income taxpayers make while maintaining the fairness of the overall system.

Secondly, Labor believes that the higher income superannuation contribution threshold should be reduced to $200,000, rather than the $250,000 proposed by the government. Parliamentary Budget Office analysis estimates that less than four per cent of taxpayers would be affected by this change, which will deliver substantial improvements to the budget bottom line over time.

There are also two measures that Labor opposes in this legislation. Labor will not support the extension of super tax concessions to allow additional catch-up contributions. The government has specifically pitched this as a solution for women who may have had fragmented working years and as a result had lower superannuation balances. Despite this being the argument of the government, the evidence tells a very different story. This measure would allow individuals to carry forward their unused concessional contributions cap for a period of five years. Only around 2.3 per cent of taxpayers made $25,000 or more worth of concessional contributions in 2012-13, with their average income being $182,000. Most Australians on lower incomes are simply not in a position to afford to make additional contributions from their take-home pay. Despite what the government claims, this measure will not provide a vehicle for women on lower incomes who have been out of the workforce for several years to contribute extra to their super balances. I have talked with many women's groups about this issue and I have read the independent analysis. There may well be women who take advantage of catch-up payments, but we maintain that these women will be predominantly higher income earners who have the capacity to contribute over and above their employer contributions.

We need to look no further than the answer that Treasury officials gave in the recent Senate estimates hearings where it was revealed that the Treasury had been unable to model any gender split. The government has also been unable to provide data to support its claims that this measure would help address the issue of improving super balances for women. And they have no answer to the Grattan Institute's work which finds that this measure will actually benefit more men than women and that the men who will benefit from it are those on higher incomes. At a time when we are trying to work to make superannuation tax concessions fairer and at a time when we need to repair the budget, Labor does not support opening up new areas for tax concessions.

The other proposal we do not support is the extension of the provisions which allow tax deductibility for personal superannuation contributions. The problem with the government's approach here is that it is not targeted at all. Improving concessions for the relatively small number of people who cannot currently make salary sacrifice contributions or claim a tax deduction for their voluntary contributions cannot be a fiscal priority at this time. If there is a genuine problem with people falling through the cracks, then Labor will look at this, but this deduction would cost almost $1 billion over the forwards and it will be primarily taken up by higher income earners. We do not believe it is not the answer. These two measures combined that Labor opposes would also cost the budget $12.3 billion over the next decade and, at a time when we have a government that has more than tripled the deficit, Labor does not believe that they are in any way affordable.

In terms of some of the other measures in the package, we support the introduction of a $1.6 million superannuation transfer cap, the low-income superannuation tax offset, improving the superannuation balances of low-income spouses, removing the antidetriment provision for death benefits from superannuation, and strengthening the integrity of retirement income streams. Labor will continue to work towards a superannuation system that is fair, sustainable and sets Australians up for their future. We announced our package when we responded to the government's finalised package, which came out in three tranches of legislation just over a month ago. We have looked at that government package and we have finalised our proposals based on that. We have been leading the debate on reforming superannuation tax concessions for over a year and, while we do accept that the government's superannuation package goes some way to reforming these concessions, we believe they should go further.

I am in the process of circulating amendments in relation to Labor's position for the debate later this morning. These amendments reflect the position that Labor announced a couple of weeks ago on lowering the higher income superannuation contribution threshold to $200,000, lowering the annual non-concessional contributions cap to $75,000 and opposing those two measures I spoke about this morning, the introduction of the catch-up concessional contributions and the changes to tax deductibility for personal superannuation contributions. I look forward to speaking about these further when they are considered in the committee stage of this debate. I encourage other senators to look at Labor's amendments and to consider support for Labor's amendments, which we believe will certainly better target the superannuation tax concessions and also contribute to the very important task of budget repair.