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

The coalition will support the Tax Laws Amendment (2011 Measures No. 2) Bill 2011. This bill makes the following changes to taxation laws: it adds two organisations to the list of deductible gift recipients, namely, the Charles Perkins Trust for Children and Students and also the Roberta Sykes Indigenous Education Foundation. It also allows regulations to impose rules on self-managed super funds regarding personal use—collectables, paintings and so on. It will allow the use of tax file numbers as identifiers to locate super accounts and facilitate consolidation of accounts, while making changes to the way Australian taxes, fees and charges are made exempt from the GST.

I will just make a few comments in relation to some aspects of this bill, specifically in relation to changes to personal-use asset rules for self-managed superannuation funds. This provision allows the government through regulation to impose rules on self-managed super funds invest­ments in personal-use assets such as collectables and artworks. The sole-purpose test of the SI(S) Act requires that assets of a superannuation fund be held for the sole purpose of generating retirement income. The super system review, also known as the Cooper review, recommended that self-managed super funds should be prohibited from investing in personal-use assets and those held should be disposed of within five years. The review found that personal-use assets lent themselves to personal enjoyment and therefore failed the sole-purpose test.

The government announced on 3 July 2010 that it did not support the review's position but that it would tighten the requirements around investment in personal-use assets. These amendments allow the government by regulation to impose rules relating to investment of personal-use assets by self-managed super funds. Those rules can cover: artwork, jewellery, antiques, artefacts, coins or medallions, postage stamps or first-day covers, rare folios, manuscripts or books, memorabilia, wine, cars, recreational boats, memberships of sporting or social clubs, or assets of a particular kind if assets of that kind are ordinarily used or kept mainly for personal use or enjoyment, not including land. The coalition are of the view that the approach proposed by the government reflects a sensible balance. We are also aware that it is supported by the self-managed super fund industry body, SPAA.

In relation to the proposal to use tax file numbers as identifiers to locate super accounts and facilitate consolidation of accounts, this is of course part of the so-called 'super stream' proposals that came out of the Cooper review. The coalition very strongly supports the super stream related recommendations in that they will, through increased efficiencies, deliver real increases in value to superannuants and retirees across Australia. This provision allows superannuation fund trustees and retirement savings account holders to use tax file numbers to locate accounts and facilitates consolidation of multiple accounts. There are current restrictions on the way super­annuation funds can use tax file numbers. In particular they are not permitted to use tax file numbers to locate accounts for the purpose of consolidation. It does not replace account or membership numbers but removes the requirement that super funds use other methods of searching for multiple funds before using tax file numbers. An individual can still choose not to give their tax file number and there are no changes to the consequences for failing to do so. It is important in order to maximise individual retirement savings that smaller amounts are consolidated as early as possible. I pause here to say that, while we congratulate the government on having acted on this recommendation, the coalition are very disappointed that Minister Shorten has continued in his persistent failure to act on the Labor Party pre-election commitment to require the Productivity Commission to design a more open, transparent and competitive process for the selection of default superannuation funds under the modern award system. We have had a case study publicised in the media in recent days which clearly demonstrates the inevitable consequences of the type of closed shop anticompetitive process that was instituted by this government. Before the election, the government recognised that and said they would fix it. But the current minister—I would argue because he has a serious conflict of interest—is highly reluctant to act on that. The direct consequence of the minister's failure to act in relation to the selection of default superannuation funds under the modern award process by Fair Work Australia sees hundreds of thousands of Australians channelled into under­performing super funds, which means that the retirement savings of those Australians will be smaller than they otherwise would be. That is a direct result of the minister's failure to act.

Under pressure, the minister said he might start to look at this in 2012. The coalition says that is just not good enough. If a process is manifestly closed shop, anticompetitive, not open, not transparent and not competitive—and we know that it is not because the government recognised that before the election—if there is a process which is so broken that it leads to outcomes like the ones that were publicised in the media last week, it should be fixed immediately. There is no excuse for the minister not to act, other than that he wants to protect the closed shop arrangements for as long as he can get away with it so that more and more Australians are channelled into underperforming funds.

This comes on top of the minister's reluctance to act on a whole series of other Cooper review recommendations designed to improve the transparency and corporate governance arrangements in the superann­uation industry. Those recommendations include having independent directors on superannuation boards and requiring directors who want to sit on multiple superannuation boards to make a declaration to APRA, the regulator, that there is no foreseeable conflict of interest. These are the sorts of recommendations that go directly to the confidence that working families and retirees across Australia can have in the superannuation system. Only if we get the corporate governance and transparency arrangements right, only if we continue to ensure that our superannuation industry is as efficient, competitive and transparent as possible, will we have the assurance that the returns for families and retirees across Australia will be maximised.

I call again on Minister Shorten to reflect on his duty as a minister to act not in the vested interest of the union movement or other sections of the superannuation industry but in the public interest, in the best interest of working families and retirees across Australia. I urge the minister to have another look at the urgency of sorting out some of these issues, which are getting worse under his watch.

In this context, I also point to the current developments in Victoria, where merger talks between two superannuation funds are close to collapsing—they might well collapse in the next few days—on the basis that union representatives for one of the super funds have not been able to get a guarantee that there will be a continuation of union nominated positions in the merged entity and also because they are not happy to go along with the proposal for democratic elections of super fund boards in the future. Super fund trustees are required to act in the best interests of members in making judgments on whether or not a merger should go ahead. If, as has been reported, the merger in Victoria is going to collapse on the basis that some current super fund trustees have not been able to obtain a guarantee that there will be union nominated positions in the merged entity, that is not a decision, on the face of it, made in the best interests of members. It looks to me like a decision made on the basis of the self-interest of the current super fund trustees and the bodies they might think they are representing.

The provision in the legislation in relation to tax file numbers being able to be used as identifiers to locate super accounts and facilitate consolidation of accounts is a good step as part of a broader superannuation reform agenda, but there is a lot of unfinished business in this legislation if we are committed to ensuring that our super­annuation industry is as efficient, transparent and competitive as possible. I have touched on a few of the issues. There are quite a few more. I suspect that in the weeks and months ahead there will be serious debate and serious focus on the minister's and the government's failure to act on some of these issues despite clear and emphatic pre-election commitments.

This bill also deals with exempting Australian taxes, fees and charges from the GST. That is a rather straightforward proposition which we support. The bill makes various other amendments to tax laws which do not require any further discussion at this point in time. With those few words, I again confirm that the coalition will be supporting this bill.

Christine Milne (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I rise today on behalf of the Australian Greens to support Tax Laws Amendment (2011 Measures No. 2) Bill 2011. I want to make some comments in particular in relation to schedule 2, which allows regulations to be made setting the rules for self-managed super funds investing in personal assets and collectibles, including art. The Australian Greens believe that artworks and other collectibles must continue to be legitimate investments for self-managed superannuation funds.

We were particularly distressed when the Cooper review into the superannuation system made a recommendation that self-managed superannuation funds no longer be allowed to invest in personal assets and collectibles, including art. The art industry in Australia was rightly concerned that such a blanket ban would adversely affect the art market in Australia. The Cooper review's recommendations would have had a considerable negative impact on the art market and would have been particularly detrimental for Indigenous artists. Super­annuation investments are worth almost $100 million per year to the art industry according to the Save Super Art campaign, and the recommendation by the Cooper review to dispose of currently owned art and the cessation of future investments means that the art industry would potentially face considerable instability and the income opportunities for artists would have been put at risk. The Indigenous art market, as I indicated, would have been greatly impacted by the Cooper review recommendations because, as we are all aware, there is a significant global market for Indigenous art, making it attractive to self-managed super­annuation funds and therefore creating an incentive for buyers with around 60 per cent of Indigenous art being bought through the self-managed superannuation funds.

This is a really critical issue. It is well-known in Australia that we value the arts, but we fail to support them. We support them in fairly small ways, with government grants, but being an artist in Australia is not a lucrative profession for most. We are all aware of how artists are supported in other countries. While I was in Copenhagen for the climate talks, I went to an artist village in the city. It had been built after the Second World War. Basically they built an area for artists to live where they were provided with low-rent accommodation providing they were engaged full-time in creating art. There was recognition that the Danish people value the contribution to the community and to the culture by the artists involved. Now it is quite a fantastic little area of the city because artists, over time, have contributed to it by creating sculptures and by painting various murals around. It really is a beautiful part of the city. I thought what a great contribution, what foresight the government had to build this village to support artists in this way because we know so many artists struggle to make a living from their art.

The same thing goes in this country. Most of us would agree that the capacity that Indigenous communities now have to make money from their artwork has been one very significant step forward for Indigenous people to be able to get income into communities where that previously had not occurred. The Greens in particular are cognisant of how important the art community is in Australia in reflecting to ourselves who we really are as a nation. We get told all the time how important the economy is, but it is the health of the society which we as a community ought to be concerned about and it is artists who pose the hard questions. You only have to go down and have a look at the new Indigenous art galleries at the National Gallery—they are quite fantastic; for those of you who have not been, I thoroughly recommend going—to see there are a number of confronting pieces in that exhibition which really challenge all of us to think about the way we have engaged with Indigenous communities and which challenge us to think about how serious we are about reconciliation and so on. It is incredibly important when thinking about something like changing the regulations for these self-managed superannuation funds that, in a desire to enforce the absolute test that the purpose of the investment is for superannuation income, we do not under­mine the income of the arts community around the country. There is a very strong recognition that the ban on investing in art will ultimately have resulted in harm to artists around the country because it would have eliminated the incentive to buy artworks and therefore decrease the market and therefore the returns to our visual artists in particular.

During the election campaign the Australian Greens joined with the Save Super Art campaign, calling on the government to reject the recommendation of the Cooper review and allow superannuation funds to continue to invest in art. The Save Super Art campaign was supported by numerous organisations, including the Australian Artists Association, the National Association for the Visual Arts and numerous art galleries. To the government's credit, it listened to the concerns of the campaign, it listened to the concerns of artists around the country. You can imagine what would have happened if the Cooper review recommendation had been taken up that the current owners had to dispose of their art straight away and cease any future investment. There would have been a complete collapse in the value of a lot of the works that would have been forced onto the market all in one burst. I am glad the government listened to those concerns and announced, again during the election campaign, that the government would not implement a ban on investing in art and other collectables but would move to clarify the rules surrounding such investments. The Greens do appreciate the need for investments by superannuation funds to comply with the sole purpose test under­pinning the superannuation investment regime. We do understand that the govern­ment is currently consulting on the draft regulations that will be made under the changes that will occur when this bill passes the parliament.

We do not want to presume the outcome of those consultations going on in the community at the moment, but we do know that there remain concerns about the restrictions that are being imposed on collecting art and other personal assets. One of the concerns raised by the Australian Artists Association includes the additional costs associated with storing art off the premises of parties related to the super fund, and the restrictions on leasing art, even when that art is leased at commercial rates to related parties. Again the issue here is to make sure it is a genuine superannuation investment. If you have made that investment and then you cannot have the enjoyment of that for yourself because it is regulated that you need to have it off premises or whatever, or if you lease it to a related party at a commercial rate, I understand that is still going to be a matter of grave concern to people in the arts community. I think that that might well constitute a disincentive on the part of self-managed superannuation funds to invest in art. I think artwork is different from other personal assets. We continue to talk these issues through with the government to make sure that the integrity of the superannuation system is maintained but also to ensure that art can continue to be a practical investment for superannuation funds and that such investments can continue to support our art industry. I want it very clearly on the record that that is the perspective of the Greens.

We must do everything we can to support artists out there now—artists who are relying on the fact that self-managed superannuation funds can collect art—to maintain the art market and provide an income. As I indicated before, Indigenous communities in particular are reliant on this. We have worked hard on the resale royalty scheme to start generating income for communities. In that context, we have argued strongly that there needs to be government funding to assist community art centres—and Indigen­ous community art centres in par­ticular—to be able to build capacity to handle all of the administrative work that is going to have to be undertaken in terms of the resale royalty regime and so on.

We do not have a history or a culture of philanthropy in Australia when it comes to the arts. Unlike other countries, where you have wealthy benefactors who put huge amounts of money into the arts in all sorts of ways, we find symphony orchestras and leading artists struggling. We do not have the culture, which does exist in other places, that takes on, if you like, patronage to emerging artists, supports them and creates opportunities for them. In other countries too, governments take a much more prominent role in supporting the arts than we have in Australia.

Some people argue that perhaps the community sees this as elitist, but I would question that. When I go around Australia I see the numbers of people who go to local exhibitions and local theatre. When an orchestra or the Australian ballet, for example, come to regional communities, they are patronised with great enthusiasm. An example I would put on the record here is the Burnie Gallery, on the north-west coast of Tasmania. They are a fantastic regional gallery. They have a large number of events and exhibitions, which are widely patronised and highly valued in that part of Tasmania. We have a thriving arts community in the state of Tasmania. But we do not have a community that is particularly wealthy, so we do not want to put disincentives in the way of people who want to support local artists through self-managed superannuation funds. We do not want to put a disincentive in the way of Indigenous communities to have ongoing benefit from the artwork which has been a significant contributor to improved income in remote and regional communities throughout Australia.

With those remarks, I support the bill. I look forward to engaging with the govern­ment further as the regulations are developed in relation to covering personal assets and collectables under self-managed super­annuation funds.

Don Farrell (SA, Australian Labor Party, Parliamentary Secretary for Sustainability and Urban Water) Share this | Link to this | Hansard source

I would like to thank senators who participated in this debate, particularly Senator Milne. I commend the bill to the Senate.

Question agreed to.

Bill read a second time.