Mathias Cormann (WA, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

The Superannuation Legislation Amendment Bill 2010 amends superannuation and taxation laws to clarify and streamline Australia’s superannuation system, with key changes, including: transfer all of unclaimed state and territory public sector superannuation moneys to the Commissioner for Taxation, as is already the case in the private sector; relief for superannuation funds until 1 July 2011 under the clarified rules regarding tax deductibility of total and permanent disability insurance; allowing superannuation funds to acquire an asset as a whole following a relationship breakdown; and a series of additional minor clarifications to the tax treatment.

The coalition will not be opposing this piece of legislation. However, I thought I would make a few broad observations in relation to super. There is of course a new minister now, Minister Shorten, who is now responsible for the superannuation portfolio. He cannot be blamed for all of the things that have gone before him. But this government has very bad track record when it comes to superannuation. I remind you, Acting Deputy President Moore, that before the 2007 election the then Prime Minister made a very clear commitment—one of the many commitments which were broken after the election—that there would be no change to superannuation. In fact, the words he used were, ‘Not one jot, not one tittle’. Indeed, he said those words several times. I am sure, Acting Deputy President, you would remember those words having been mentioned at the time.

What has happened over the last three years under this Labor administration in relation to super? The Rudd-Gillard government has halved the concessional contribution caps, penalising thousands of Australians who inadvertently exceeded them and undermining Australians’ incentive to save for retirement; the Rudd-Gillard government has cut back government co-contribution payments, discouraging low-income earners from saving; and the government have mandated that industry funds be the default superannuation fund for the bulk of modern awards, curtailing competition among funds. That, of course, is one of the significant challenges that Minister Shorten has got in front of him in his new portfolio—dare I say it—moving forward. The government promised to tender the role of superannuation clearing house to the private sector, but, of course, instead, gave the contract to Medicare. There is absolutely no doubt that Labor’s tampering with the superannuation system over the last three years has significantly undermined the confidence that Australians have in our superannuation system. The result is there for all to see. Voluntary contributions to our superannuation system have completely collapsed under the Rudd-Gillard Labor government watch.

So in comes the Labor government. There is a challenge: ‘We have stuffed the system up a bit, people are losing confidence, so what do we do? Oh well, we have got to come up with an easy solution. Let’s just propose that there will be a three per cent mandatory increase in the superannuation guarantee. If people are not prepared to put their own money into super funds voluntarily’—because they have lost confidence based on the changes that were made to the system by this government—‘then let’s mandate it. Let’s tell them that we are going to enforce a three per cent effective cut in take-home pay. You are not prepared to put your own money into the system by yourself, so we are going to force you to do it.’

The minister came out yesterday—this is one of his first forays into the debate—seizing on a national survey into community attitudes and values towards superannuation which the government had commissioned. He says in his press release, quite extraordinarily:

The research, by independent market research company Colmar Brunton, found there is universal concern that 9 per cent of salary is unlikely to be sufficient to allow people adequate funds for retirement.

And what is the basis for that assertion, you might ask? In his view Australians support compulsory retirement savings and ‘universally’ are concerned that nine per cent is not enough because 29 per cent are not confident they will have enough retirement savings and a further 35 per cent are neither confident nor unconfident—they have not got a view. So 29 per cent of people say, ‘We are not confident that we will have enough retirement savings.’ The obvious point to make is that anyone who is not confident that they will have enough retirement savings of course, as Ken Henry observed in his very considered piece on the subject, is always free to make additional contributions or make additional savings to ensure that the savings that are available as post-retirement income are more adequate than they otherwise might be.

I just make the more general point that Minister Shorten and the Gillard Labor government are going down a path, of pushing this increase in the superannuation guarantee from nine per cent to 12 per cent, which was explicitly rejected by the Henry tax review committee. They looked at all this for 18 months or so, and do you know what their conclusion was? Their conclusion was, and I quote from the report, the burden of any superannuation guarantee increase ‘is likely to fall most heavily on low- to middle-income earners.’

Why would Minister Shorten want to do something which is going to hurt low- and middle-income earners the most? He might well have very good reasons for it, but so far he has not actually come out and explained it to people. All the work that was done by the Henry tax review committee, the secret modelling and all the secret modelling that was done by Treasury afterwards—all the work that might have been done to take the government from the recommendation ‘don’t do it; do it this way’ on one side to the other side, ‘Well, no, let’s increase the superannuation guarantee from nine per cent to 12 per cent’—that led them to change their view from what was recommended to what they ultimately recommended is secret.

The Gillard government are the most secretive government in the history of the Commonwealth. They are even worse than the Rudd government was. This is a Prime Minister who told us that there would be a new era of openness and transparency. And every step of the way, at every corner of the road, whenever they are being tested on their stated commitment to openness and transparency they fail. They fail every time. Of course, on this occasion the Senate as a whole has called on the government to release the modelling and all of the advice that led them to change their mind—that led them to a conclusion that was vastly different from the conclusions reached by Ken Henry and his committee. Why, rather than to go down the incentive path that Mr Henry recommended, did the government think it was more appropriate to go down the mandatory compulsory three per cent cut in take-home pay path? Nobody has explained this. Minister Shorten has not explained it.

So I give Minister Shorten two challenges tonight. The first challenge is that he come out and properly explain what led the government to change its mind from the recommendation that was put on the table by Ken Henry, which was not to go down the increased superannuation guarantee path. What convinced the government that Dr Henry was wrong? What convinced the government to go this other way? And what information has the government got that reassures them that it is not going to be low- and middle-income earners who are going to pay the price?

I understand very well that across the superannuation industry there is broad support for an increase in the super guarantee levy. Of course they would support that because for the superannuation industry this is a very easy way of achieving an increase in funds under management. Of course they would be in favour of an increase in the compulsory acquired proportion of people’s take-home pay to go into superannuation funds rather than into people’s pre-retirement income. But the minister has not provided adequate explanations yet—and I am hopeful that he will—as to why he thinks that the considered opinions and views of Dr Ken Henry and his committee are not worthy and are not appropriate.

The second challenge for Minister Shorten in his new job as the Minister for Financial Services and Superannuation is that he has to ensure that there is proper competition among superannuation funds that are identified as default funds under modern awards. Employees across Australia are missing out because this government has not found a way to ensure there is proper competition in the determination of default funds under modern awards. I will just go through a little of the history here. For the purposes of award modernisation, which occurred throughout 2008 and 2009—as I am sure you would remember well, Madam Acting Deputy President—superannuation was included as an ‘allowable matter’ in the industrial process under division 3 of the Workplace Relations Amendment (Transition to Forward with Fairness) Bill 2008. This meant that default superannuation fund arrangements must now be included in modern awards. The Workplace Relations Amendment (Transition to Forward with Fairness) Bill 2008 was the legislation that required the Australian Industrial Relations Commission, now Fair Work Australia, to make default superannuation fund arrangements for people on awards.

Throughout 2008-09 and beyond, the Australian Industrial Relations Commission, and now Fair Work Australia, have selected default superannuation funds in modern awards. If you look at the facts then you will see very clearly that there is a significant bias towards industry union superannuation funds. No retail funds are prescribed in the most widely applied modern awards. When this process began in 2008 the then Minister for Superannuation and Corporate Law, Senator Nick Sherry, wrote to the Australian Industrial Relations Commission asking for the commission to implement objective criteria for the selection of default superannuation funds. The commission declined the minister’s request. Effectively the Australian Industrial Relations Commission ignored the government’s direction.

The other challenge for Minister Shorten, one of the two key challenges for Minister Shorten in the next couple of weeks, is to ensure that this anticompetitive policy, which is not in employees’ long-term best interests, is going to be addressed. He has to find a way to ensure that employees who are catered for under superannuation default arrangements under modern awards can benefit from the best possible value that is available in the market. At present, that is not the case. That is a development that has occurred on the Labor Party’s watch. It is a development that is not in the best interests of working families. I am very hopeful that Minister Shorten is going to make sure that there is appropriate competition, that there is appropriate transparency and that there is going to be a commitment to proper efficiencies in this area.

In conclusion, I again make the point that this Labor government have a very, very bad track record on superannuation. Under their watch, voluntary contributions to the superannuation system have collapsed because of ill-considered changes they made after promising before the 2007 election not to make any changes at all. We are now in a circumstance where, faced with that challenge, the government are saying that they have to find a way to increase national savings—something we support as an objective. So they say: ‘We’ve failed so far. Let’s mandate additional savings’—by enforcing what effectively amounts to a three per cent cut in take-home pay. If people do not have confidence in putting their own money into superannuation voluntarily, there has to be a question mark as to whether or not it is appropriate for the government to take their money away and force them to put it into something they are not prepared to invest in spontaneously themselves. One of the reasons that people do not have confidence is because, under the so-called modern award system, people are not getting the best value for their money. They are quite legitimately concerned that, in the absence of competition between superannuation funds that were put in place under default arrangements, they are not getting the best possible value in the marketplace. With those few remarks I indicate that the coalition will not be opposing this legislation.

Joe Ludwig (Queensland, Australian Labor Party, Manager of Government Business in the Senate) Share this | Link to this | Hansard source

I thank Senator Cormann for his contribution. The amendment contained in schedule 1 will allow both state and territory authorities and public sector superannuation schemes to transfer unclaimed superannuation to the ATO. This will make it easier for individuals to track down unclaimed superannuation that they may have. Individuals will, of course, be able to claim back their money from the tax office at any time.

Schedule 2 provides transitional relief to superannuation funds by amending the tax law to allow funds to claim a broad reduction for total and permanent disability premiums. The transitional relief applies from the 2004-05 income year to the 2010-11 income year.

Schedule 3 amends the Superannuation Industry (Supervision) Act 1993 to allow superannuation fund trustees to acquire an asset from a related party of the fund following the relationship breakdown of a fund member. This change will ensure that separating partners will have the option of obtaining a clean break from one another in terms of their superannuation affairs if they so wish.

Schedule 4 makes a number of minor amendments relating to: deductions notices for successive funds; deductions for employer contributions made on behalf of former employees; the due date for shortfall interest charged in relation to excess contributions tax; allowing the Commissioner of Taxation to exercise discretion without issuing an excess contribution tax assessment; providing a regulation-making power to specify the circumstances when a benefit from a public sector superannuation scheme will have an untaxed element; and streamlining the reference to ‘Immigration Secretary’ and ‘Immigration Department’. These amendments will ensure the continued smooth operation of the superannuation provisions of the income tax law. This bill deserves the support of the House. I commend the bill to the Senate.

Question agreed to.

Bill read a second time.