John Watson (Tasmania, Liberal Party) Share this | Link to this | Hansard source

I move:

That the Senate take note of the document.

The latest quarterly report by the Australian Taxation Office on the Australian government’s superannuation co-contribution scheme for the period 1 October 2006 to 31 December 2006 is very welcome news in that it confirms previous reports as to the success of the scheme in attracting additional personal contributions to the superannuation savings of so many Australians.

Back in November 1995—and that was quite a while ago—I was Chair of the Senate Select Committee on Superannuation. The committee was very concerned and believed there was a need to promote the need for urgent action towards overcoming the poor superannuation savings of particular groups in our society. The committee issued a report entitled Super and broken work patterns at that time. It looked at the difficulties faced by groups of people such as women who were unable to maintain constant work patterns because of child-bearing or other family reasons. The success of superannuation is dependent on regular contributions over a 30- to 40-year timescale, with the magic of compounding growth giving rise to hopefully a satisfactory level of retirement income. This report looked at the lower income groups in general and tried to address some of the challenges which the set-up of superannuation placed in the way of so many people being able to accumulate sufficient retirement income to ensure a comfortable lifestyle in retirement.

One of the main recommendations of that report was that measures be taken to redress the tax imbalance experienced by low-income earners. By introducing the co-contribution scheme for low-income earners the coalition government has not only redressed the balance but also taken a major positive step towards encouraging people in this situation to contribute towards their own superannuation. Initially the scheme offered dollar-for-dollar matching of contributions, up to a maximum of $1,000. The scheme has now been made even more generous. It currently offers a co-contribution of up to $1,500 a year to match contributions of $1,000. Of course, there is a sliding scale depending on the level of income.

As many commentators have noted, and as I have on many occasions, this co-contribution scheme must be one of the best investments available to anyone at the moment. Thankfully, many Australians have grasped the opportunity to build their superannuation savings through this scheme. I note that many of the major industry funds are advertising the benefits of this and encouraging many of their members to take up this government offer. I am also pleased to note that over 30,000 people in my home state of Tasmania have received co-contributions and boosted their potential retirement incomes accordingly.

The success of the scheme was indicated in the first three years of its operation. Government contributions now total something like $2 billion. It is a very significant and worthwhile amount. Many of these contributors will be people earning their incomes through broken work patterns and through part-time, seasonal or other irregular work. Many will be women whose past work patterns may not have given them an opportunity to build up good superannuation savings and they are now able to boost these savings with the help of this generous scheme.

I note that the recent major superannuation reforms announced in last year’s budget included the ability for self-employed people to contribute to and benefit from this scheme from 1 July this year. This is a very positive step forward. This report shows that Australian workers are continuing to accept this scheme as a winner. With the government contributing $1.50 for every $1, this is indeed good news for superannuation savers in Australia.

Andrew Bartlett (Queensland, Australian Democrats) Share this | Link to this | Hansard source

I would like to speak to this quarterly report on the superannuation co-contribution scheme. I note Senator Watson’s comments about the origins of the scheme back in 1995 and the work of the Senate Select Committee on Superannuation. I am not sure who the Democrats’ representative on the committee was at the time. I suspect it was Senator Cheryl Kernot. She certainly played a pivotal role in the expansion of superannuation back in the time of the Labor government. I think the Democrats’ contribution should be acknowledged.

I also note the contribution of the Democrats to the co-contribution scheme in general when it was expanded after the 2003 budget. That was the period when I was Leader of the Australian Democrats and I think Senator Cherry, from memory, covered the superannuation area for the Democrats. The Democrats were pivotal in getting changes to what the government put forward initially in their budget in 2003, and the result was a significant cut to the then high earners’ superannuation guarantee levy, I think it was called. At the time, the Democrats were pivotal in reducing the proposed tax cut for higher income earners and putting the savings instead into government support for low-income earners who would be putting contributions into their superannuation.

I am very keen to put on the record the Democrats’ legacy and our pivotal role in redirecting resources that were to go to a big tax cut for the highest income earners and channelling it towards lower income earners and, at the same time, via that mechanism, encouraging them to increase their superannuation contributions or, in many cases, I imagine, start their own superannuation contributions. It has been a bigger success than anybody anticipated. Certainly the figures detailed in this quarterly report indicate that it is far more successful and, therefore, from the government’s point of view, far more expensive than they initially expected that it would be. It has since been expanded, as Senator Watson said, from that dollar-for-dollar matching to a $1.50 for $1 benefit. That was done in the following budget, in 2004. I think it is important to note the Democrats’ role in laying the groundwork for that co-contribution. It was our support that enabled it to happen, because it was opposed at the time by the Labor Party and by the Greens.

In looking at the document tabled yesterday, we can see that, just in that quarter from 1 October to 31 December last year, nearly three-quarters of a billion dollars have been paid out of government funds to low-income earners. That is obviously money that will assist in building up not only those individuals’ superannuation savings but also savings in general in the community. Looking back to the annual report that was tabled towards the end of last year, the total of superannuation co-contributions for the financial year 2005-06 was very close to a billion dollars—that was provided to people who were earning less than $40,000. That was expanded so that people could get a partial entitlement up to $58,000. As Senator Watson said, a higher than average proportion of those people are women and people who, by definition, have lower incomes. I think it has proven its worth.

The total amount of $742 million so far in that quarter that I referred to suggests that this financial year it will probably go over the billion-dollar mark of extra support for low-income earners to boost their superannuation savings. Whilst there are some issues with regard to equity, I think it is far more equitable than the alternatives that were around previously and will certainly massively boost savings for many people who otherwise would not have much in the way of superannuation. We all know that there is still a significant shortfall for many people, but this will go a long way to improve that and I am pleased that the Democrats have played a role in making that happen.

Question agreed to.