Mathias Cormann (WA, Liberal Party, Vice-President of the Executive Council) Share this | Hansard source

Thank you very much, Madam Deputy President. Firstly, I would like to thank those senators who've contributed to this debate. The government is committed to putting members first and protecting their hard-earned retirement savings from erosion through excessive fees and the inefficiencies that result from holding multiple superannuation accounts. The government will support the Greens' amendments to facilitate passage of this bill to ensure key measures are able to commence from 1 July 2019. These measures include preventing trustees of superannuation funds from charging administration investment fees exceeding three per cent per annum of the balance of accounts below $6,000. It also prevents trustees from charging exit fees, regardless of account balance.

This legislation, whose passage through this chamber today we are facilitating, will abolish exit fees on all superannuation accounts, which is of course a great advance and to the great benefit of Australians saving for their retirement, who should be able to keep more of their own hard-earned money, rather than losing it in fees. Under this bill, all inactive accounts with a balance below $6,000 and no insurance cover will be transferred to the ATO. The ATO will, for the first time, be empowered to proactively return these amounts, along with existing unclaimed superannuation moneys, to their rightful owner's active accounts. This will result in around $6 billion belonging to three million members being reunited in the first year alone. The ATO will reunify an amount it holds with its rightful owner within 28 days. Importantly, the amendments in this bill will all now apply from 1 July 2019.

The remaining aspects of this bill, including in relation to superannuation, remain government policy, and the government will continue to work in good faith to secure the passage of these further reforms through the parliament. However, as this government has always done in our period in government, when we can secure the passage of substantial reforms, even if we can't get 100 per cent of what we believe should be legislated, we secure the passage of what we can secure when we can secure it. As a result of the passage of this bill, which we hope will occur later tonight, Australians with account balances of less than $6,000 will have their account balances protected, because there will be a cap on their fees. The trustees will be prevented from charging fees exceeding three per cent per annum, and we are abolishing the exit fees, with is a great advance for Australians saving for their retirement.

I should say that the government acknowledges that insurance in superannuation provides benefits to many people. However, there are some cohorts that do not receive value from insurance, and for too long these people have been cross-subsidising other members. The independent Productivity Commission, in its superannuation report, found that while insurance in super provides value for money for many members, it does not for all, particularly for young members or members with low incomes. The Productivity Commission found that insurance in superannuation is poor value and does not meet their needs, meaning that premiums can result in undue erosion of retirement savings. As I have indicated, the government remains committed to this policy. However, in the interests of ensuring all the other protections in this bill and all the other important reforms delivering benefits to Australians saving for their retirement—

Senator O'Neill interjecting—

Senator O'Neill is laughing at the fact that we are protecting retirement savings of Australians saving for their retirement. We are abolishing exit fees, we are capping the amount of fees that can be charged on superannuation accounts with balances below $6,000 and, indeed, we are also facilitating the consolidation of superannuation accounts, which is, of course, also an important benefit.

Senator O'Neill seems to suggest that instead of banking all of these improvements now because there was a consensus in the chamber behind them, we should have allowed Labor to completely dismantle every aspect of this bill and stopped Australians saving for their retirement from having the benefit of the abolition of exit fees, the three per cent cap on fees that trustees can charge on account balances of less than $6,000 and the consolidation of accounts, which are all part of this legislation.

In relation to extending the definition of 'inactivity', let me say that the original period of 13 months was chosen to provide a balance between the amount of time that account balances are subject to erosion through fees and insurance premiums while being held in multiple rather than consolidated accounts. While noting the Productivity Commission's recommendation and industry's voluntary code of practice for insurance and super, both feature 13-month periods of inactivity. The government has heard concerns raised by stakeholders that some members on extended maternity leave or on extended breaks from work may lose their insurance coverage under this bill. We have therefore agreed to support the relevant amendment circulated by Senator Whish-Wilson.

In relation to administrative actions counting as activity, the government is aware that some stakeholders have called for the test to be extended so that activities such as varying the investment option or changing the insurance cover count as being an active account. It is appropriate to link activity to receiving contributions. Any broadening of the definition of 'inactivity' would result in less-targeted policy. Accounts that are not receiving contributions are at particular risk of erosion, so the government agrees to this element of the amendments.

The government has taken action to address superannuation guarantee noncompliance. The government has introduced, for example, a package of targeted reforms to help improve superannuation guarantee integrity which include improved powers for the ATO to recover unpaid superannuation guarantee entitlements, court ordered penalties for employers who repeatedly fail to pay their superannuation liabilities and increased visibility of superannuation guarantee nonpayment to the ATO, including via extending single-touch payroll to all businesses and increasing fund reporting of superannuation contributions to the ATO.

In relation to the requirement for the ATO to consolidate accounts wherever possible within 28 days, the ATO estimates that, once it receives an amount for which its data matching has identified an active account that can receive the amount, it would take less than a month to transfer it to an active account. The government supports the amendment which allows for the consolidation of accounts within 28 days.

The important point here—and I do want to thank Senator Whish-Wilson for having engaged so constructively with me in relation to these matters and also thank his staff for working so constructively with the staff in the Treasurer's office and my office to talk through these issues—is that this is a consensus which will help secure the passage of important reforms for millions of Australians. This is very good news. I confirm again that the government will separately seek to pursue the remaining elements of this reform package and will continue to work in good faith with all parties represented in the parliament to that effect. With those few short words, I commend the bill to the Senate.

Question agreed to.

Bill read a second time.