Scott Ludlam (WA, Australian Greens) Share this | Link to this | Hansard source

As I foreshadowed in my remarks earlier, this amendment is designed to close what is essentially a loophole in the original bill, which would allow people who currently own an investment property to take advantage of these first home saver accounts. I think that is a somewhat perverse incentive through which people who have already had access to the wherewithal and the finances to purchase an investment property that they did not happen to be living in can still take advantage of these Commonwealth grants. The Greens do not believe that people who are in a position to own investment properties should be able to access this sort of funding. We think these funds should be targeted to the areas of most need, as I foreshadowed earlier. I therefore move Greens amendment (1) on sheet 5589:

(1)    Schedule 1, page 3 (before line 15), before item 2, insert:

1A  Paragraph 15(1)(c)

Omit “at a time when the dwelling was the person’s main residence”, substitute “at any time”.

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

I will respond on behalf of the government. We will not be supporting the Greens amendment. The first home saver account does not limit eligibility where an applicant holds an investment property. To do so would be to impose a further regulatory and compliance requirement. Given the likely size of the issue that the Greens have raised, which I think would be very small in reality, we do not believe we should be imposing additional compliance requirements.

I might point out that I have been involved to a significant degree in the development of the disclosure documentation on these first home saver accounts, and the documentation that has been prepared is simple, readable, distinct and standardised, which I think is a very good thing. The more requirements we add, the more the disclosure document has to be added to, and that is a difficulty because the reading and understanding of disclosure documents more generally in financial services is not easy—and that is putting it mildly. We have attempted, and I believe achieved, a simple and standardised disclosure document. So, the more caveats, requirements et cetera that are added, the more difficult both compliance and disclosure become. I have a point to make in respect of a technical issue on means testing; I will get to that shortly. We do not support the Greens amendment on this occasion.

Cory Bernardi (SA, Liberal Party, Shadow Parliamentary Secretary for Disabilities, Carers and the Voluntary Sector) Share this | Link to this | Hansard source

The coalition will not be supporting the Greens amendment on this issue. While I recognise the very well-intentioned reason for it, we do not support increased regulation that might see a decrease in the uptake of these important first home saver accounts. I also make the point that people choose to save in many ways; and if they choose to save for and purchase an investment property, it adds to the availability of rental stock in the market and provides access to rental accommodation. That is very important and much needed in Australia today. If they are prepared to put that means of saving forward for themselves, they should also be able to avail themselves of a savings mechanism that is tax effective so that they can purchase a home for themselves as well as supplying a rental property for other Australians that are in need.

Scott Ludlam (WA, Australian Greens) Share this | Link to this | Hansard source

I find it pretty remarkable, actually, that a three-word amendment could increase the compliance burden. I honestly cannot see how, as the minister said, this would increase the compliance burden. Given that we are asking people to tell the department a fair bit about their financial circumstances in order to receive one of these grants, I honestly do not understand how this increases any compliance burden. As Senator Bernardi pointed out, we are not trying to restrict the uptake of first home saver accounts; we are trying to restrict them to where they are needed most so that the scarce financial resources in the Commonwealth housing budget can go to the people who need them most. That is not, in my belief or the Greens’ belief, people who already have investment properties. I do find it strange that there would not be support for this simple amendment—but I do commend it to the chamber.

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

I understood we were dealing with just Greens amendment (1) but we seem to be dealing with both together. Is that right?

Trish Crossin (NT, Australian Labor Party) Share this | Link to this | Hansard source

We are dealing with both bills, but Senator Ludlam has only moved amendment (1).

Question put:

That the amendment (Senator Ludlam’s) be agreed to.

Scott Ludlam (WA, Australian Greens) Share this | Link to this | Hansard source

I move Greens amendment (2) on sheet 5598:

(2)    Schedule 1, page 3 (after line 27), after item 3, insert:

3A  At the end of Part 8

Add:

132 Regulations providing for means testing of the annual Government contribution to be paid to an FHSA

                 The Minister, by 30 November 2008, must provide by legislative instrument for the means testing of the annual Government contribution to be paid to an FHSA.

This amendment introduces a means test similar to other ways in which state and Commonwealth governments ensure that scarce funding is targeted at people most in need. We have introduced it by way of regulation, so we have not determined a threshold, but I expect that that would be commensurate with other forms of means tests where similar instruments are used in different legislation.

Basically, we are just making sure that the people who need this kind of assistance are the ones who receive it. At the moment I find it extraordinary that we would not be means-testing such a device. The people who simply do not need this kind of assistance would still be able to draw upon it, and that is money that we cannot spend on people in far greater need. So I commend this amendment to the Senate.

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

On the first argument that Senator Ludlam presented, the concept of means testing and the principle of means testing does apply widely through a range of social security and tax measures. But the government will not support this amendment.

In opposing the amendment I want to explain some of the practical difficulties. Although the means test may apply at the opening of the account—let us say that you were earning $30,000 today and you opened the account—an individual’s circumstances can and almost certainly would change in terms of their income over, say, the four years that they contribute to the account. Their pay may go up or their pay may go down. In fact, it is highly likely that their pay would go up over that four-year period because their employment and income circumstances would have changed.

If we were to adopt a means-test approach to the first home saver accounts, the consequence of that would be that the ATO would obviously have to monitor every individual’s change in income—and there would be a lot of people whose income would go up, and some would go down. Then it would have to make an adjustment to the government contribution, based on the means test. Administratively this would be extremely cumbersome. I know you have not designed the schedule of the phase-out of the contribution, or perhaps a phase-up of the 15 per cent contributions tax treatment, but, if you were to do that, implementing this, with individuals’ incomes going up in this way, on a medium-term savings account would administratively be very complex. We believe that on this particular account it is impractical and administratively very difficult.

The second issue that leads on to is that we would have to disclose this. A disclosure document will be issued to the individual when they open up the account. You would have to explain the means test and the way it would operate. In law you have to do that at the moment and, frankly, on this type of product I think it would be very difficult to explain to an individual the detail and the interaction of the means test. Even if you did and they read the disclosure document and understood it when they opened up the account, two or three years down the track I suspect it is unlikely that they would recall the details of the means test, and their pay will have gone up. Then they will look at their account and see that the government contribution has changed. They will say, ‘Why has the government reduced my contribution?’ They will not recall the details of the means test.

So whilst I am generally supportive of the means-testing approaches, in this case it adds very significantly to administrative complexity and disclosure complexity. This is a four-year savings horizon, and we believe that if you introduce this approach it would also have the adverse impact of reducing the take-up of the accounts. For example, for those who wanted to save over a shorter time frame than four calendar years, it would adversely impact on the take-up. They may want to save, I think, technically, over four financial years so in terms of calendar year time you could contribute at a minimum two financial years and two days—and I would have two double-check that. We just believe that, firstly, in terms of the administration of this and the impact, there would be very significant compliance costs and, secondly, the disclosure requirements and the variable impact on the government contribution and/or the tax treatment would certainly not be appreciated or understood one year, two years or three years down the track when the individual looked at their account and saw a different contribution from the government this year compared to, say, the last, and this would be the case even if it had been understood initially through reading the disclosure document. So for those reasons we are not supporting the means test of the first home saver account.

I have one final point, and it is a technical point. You remember Senator Ludlam was trying to insert a second section 131. I am advised that if this were successful—and I understand that the opposition are not supporting it—it would need to be redrafted in order for it to have any practical effect. I know that this government is keen to facilitate the passage of legislation and provide assistance—and if there is a technical issue that you believe needs some assistance, we are happy to provide that technical assistance—but, notwithstanding that, we cannot support the amendment.

Cory Bernardi (SA, Liberal Party, Shadow Parliamentary Secretary for Disabilities, Carers and the Voluntary Sector) Share this | Link to this | Hansard source

The coalition will not be supporting this amendment, and not only for the reasons that Senator Sherry has outlined to do with the increased regulatory impact, the compliance burdens and the potential to deter people from taking up these accounts. I approach this from its purer form, I have to say, Senator Ludlam. Anything we can do in this country to support a culture of savings and encourage people to defer immediate gratification in support of a longer term goal I think is a very positive thing given the current economic environment and the ongoing challenges that the Australian economy is going to face as the population ages. We need people to take more responsibility for themselves.

Quite frankly, there is a reasonable limit of $5,000 on the contributions that can be made into this scheme and these accounts. I understand that some people will be able to afford to put $5,000 in and some people will not be able to afford to put $5,000 in, but, no matter what the circumstances, any money that people are putting away, I think, is a positive; and I think that should be encouraged from our perspective. I recognise your commitment to ensuring that this a fair and equitable process and I commend you on that, but I think that in this circumstance we need to have an entire approach across our community to encourage everyone to save as much as they possibly can and put aside for their own future.

Scott Ludlam (WA, Australian Greens) Share this | Link to this | Hansard source

Those are highly commendable statements. We are all for a culture of savings right across the board. But I would urge second thoughts, I suppose, in that we are about to pass a bill which will allow potentially very wealthy people who do not need assistance to open these first home saver accounts. I really do not understand why, when there is $1 billion on the table, or somewhat more than $1 billion, we could not check back on people’s incomes a year or two years afterwards. It is not something that would need to be regulated moment to moment as people’s incomes or circumstances changed, but with such a large appropriation on the table I cannot see why it would be impossible or beyond our means to test their income a year or two years after the first home saver accounts were opened.

I also do not think that people who opened these accounts and who found their circumstances were better some way down the track would resent the amount of support being withdrawn. When we have 100,000 Australians in various categories of homelessness I do not think that it would be in the Australian character to begrudge giving back a certain amount of that money or not drawing as heavily on Commonwealth funds. This is more than half of the new Commonwealth spending on housing affordability, and we think it is completely out of balance that so much is going to assist people to get into their first homes, which obviously we support, when the rest of that funding is really being squeezed. This is one very simple measure that we could adopt, and I simply do not understand why the compliance burden would need to be so high. So I commend this amendment to the Senate.

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

The two bills that we are dealing with here relate to prudential supervisory compliance issues. They do not relate to the basic parameters of the legislation which has been dealt with on an earlier occasion, although I do not know the date, Senator Ludlam. It is not a criticism of you, but it would have been more appropriate to have moved your amendment to the earlier piece of legislation. We have outlined all the basic parameters of operation. You were not here because you are a new senator, so I understand why that did not occur. I want to point out that it would have been more appropriate to have dealt with this. I accept that technically you can move the amendment to the administration supervisory legislation but it would have been more appropriate on the earlier bill.

Finally, while we are not means-testing, Senator Bernardi has made the point—and I made it earlier in my contribution—that there is a cap. There are a range of restrictions around this account—a $5,000 cap, for one. This is not an account into which a higher income earner can drop $50,000 or $100,000 per year, minimise tax and access the account after four years to buy some million-dollar mansion. There is a cap of $5,000 a year. That, in itself, although not in the same way and perhaps not to the same level that you want, does provide some focus on equity and fairness without doing it through a means test.

Bob Brown (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Firstly, on the business of appropriateness, this is the right time for the amendments by Senator Ludlam. It is absolutely appropriate that this be moved at this time. Senator Ludlam has moved a social equity amendment. It simply means that, if it were to pass, there will be more money available for poorer people in Australia to be housed. The cap of $5,000 enhances the argument that Senator Ludlam is putting—that money is not going to make a big difference to rich people but putting it into housing for poorer people is going to mean a great deal indeed.

As far as Senator Bernardi’s assertion is concerned—that we want to stimulate people to save more money—let us have a bill to stimulate people to save more money. This is legislation to get more Australians into housing in a country which has 100,000 people without roofs over their heads, including very distressed families with young children. The social equity component of this is very important. Senator Ludlam is moving a means test which would simply mean that there would be more of this money going to people who are in dire straits, who want to have their own homes but cannot afford them.

As far as the tax office is concerned, having difficulty with the administration of compliance, well goodness gracious! This is the age of computers. They are tracking much more complicated pieces of legislation than this. They are not all sitting there with rooms full of manila folders and pencils. I do not accept that argument in view of the important social equity component of this very worthy amendment which Senator Ludlam has before the Senate.

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

In response to that last point, part of my contribution in opposing the amendment did relate to compliance and the ATO administration issues. Let me assure you that it is not as simple as it looks to administer a means test. I did not take it that you were criticising staff in the ATO. I had a lot of dealings with staff at the ATO when I was in opposition and now have in government in the application of, say, the means-testing arrangements and the general administration arrangements in relation to superannuation. It is very complex and costly. I do not recall the precise figure off the top of my head, but the ATO is having to spend hundreds of millions of dollars just to upgrade superannuation IT—because of the constant changes in that particular area over a long period under successive governments. It is not as simple as it looks. I know they are not sitting down there in the ATO using pencils and manila folders.

David Johnston (WA, Liberal Party, Shadow Minister for Defence) Share this | Link to this | Hansard source

Or feathered quills.

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

Yes, or feathered quills. Seriously, it is not as simple as it looks. I have explained the practical implementation issues around a means-test approach that would be very considerable with respect to a means-test application to this program. There would be a very significant IT challenge, to start with. I am happy to arrange a briefing at some time from the ATO if you do want them to go through the IT administration compliance requirements when a measure is means-tested as you would propose. From the experience they have in other areas, it is not a simple matter of saying that we will have a means test and tomorrow, or in the next month or two, you redesign the IT and when you switch it on it will all be smooth sailing. It is not that simple. We have to bear that in mind when considering measures like this.

Bob Brown (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Let us have that challenge made practical. Senator Ludlam and I would very happily be briefed by the tax office if the minister will commit to accepting a regulation drawn up by the Greens, if he finds it too complicated in these circumstances to simply deal with the equity provision here. It is not much good us having a briefing after the government votes down this very worthy legislative measure, but Senator Ludlam’s amendment says that the government will provide regulations for means testing of the annual government contribution to be paid to a first home saver account. The question really is—it is not the tax office: is the government finding that too difficult or would the minister like the Greens, with the assistance of the tax office, to draw up such a regulation and maybe hold over this matter until we do that? I do not see any value in us being briefed, after the minister has voted it down, about a matter that no longer can be acted upon.

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

I am happy to provide a briefing about the IT administration difficulties and compliance difficulties with means tests and their general complexity; I have made that offer. We will still be voting down the amendment, because that is not the only reason why we oppose it. It is not the only reason; it is one of three reasons. I have outlined the other two.

Bob Brown (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I will accept such a briefing if the minister will accept a briefing from the Greens on the important social equity provisions that the government is voting down here and ought not be voting down.

Question put:

That the amendment (Senator Ludlam’s) be agreed to.