Monday, 15 June 2015
Superannuation Guarantee (Administration) Amendment Bill 2015; Second Reading
When it comes to superannuation, the Liberal Party has about as much grace as a refrigerator falling down a flight of stairs—and it has had about as many positions as that refrigerator on the way down, as well. This is a government conflicted by the issues of superannuation and what it means for our economy, for ordinary working people and, more broadly, for our national savings, which have now tipped over the $2 trillion mark thanks to the superannuation guarantee we are debating today. With that said, Labor of course supports any positive changes and supports any modernisation or assistance that can be brought about through change to the economy and more broadly to Australian small and medium enterprises. Labor does support reducing the regulatory burden on small business and will therefore support this Superannuation Guarantee (Administration) Amendment Bill. Labor supports reducing costs on small business. We understand that reducing costs for small and medium enterprises helps them to generate the ability to not only grow their business but to employ more people as well. Labor will be supporting the changes in this bill as they reduce compliance costs on small business and, importantly, do not reduce an employer's obligation to make superannuation guarantee payments for their employees.
This bill amends the Superannuation Guarantee (Administration) Act 1992 to remove the obligation for employers to offer a choice of superannuation fund to temporary resident employees or when superannuation funds merge. Currently employers must give a standard choice form to employees within 28 days of their beginning employment. Many temporary employee residents already do not exercise choice of fund or complete the choice of fund form and are therefore placed in their employer's default fund. That, of itself, is all right. Also under current arrangements employers may be required to give employees a standard choice form when the employee's superannuation benefits are transferred from a chosen fund or a default fund to a successor fund under a fund merger arrangement. Under the new arrangements in this bill, employers are not required to give employees a standard choice form. If they hold a temporary visa, as defined by the Migration Act 1958, these new arrangements will capture New Zealand citizens—even though they can generally stay in Australia indefinitely. Additionally, the new arrangements in this bill mean that employers are not required to give employees a standard choice form when their superannuation benefits are transferred from a chosen fund or a default fund to a successor fund as a result of a superannuation fund merger arrangement.
The bill will reduce costs and compliance burdens on employers—mainly small businesses—who hire people on a temporary basis, through a temporary visa, by reducing the requirement to provide them with choice of fund forms. Importantly, employers will still be required to make superannuation guarantee payments on behalf of their employees, and their employees will still be able to choose their own fund if they wish. Labor's record on reducing red tape in many areas is well known and in this area, in particular, when Labor was in government we repealed 16,794 acts and regulations—an important step in reducing the regulatory burden on small business and the community alike. Under the Seamless National Economy reforms carried out by the former Labor government, and conducted largely through the Council of Australian Governments process, just the first 17 reforms that Labor put in place reduced business costs by over $4 billion every single year. Our commitment in government to continually reduce regulation was considered part of the normal operations of what a good government does, and that ought to continue to be the case—any good government should continually look at reducing red tape and regulatory burdens wherever that is possible and it is the efficient and right thing to do.
In addition, in 2008 under Labor COAG agreed to implement regulation and competition reforms under the National Partnerships Agreement to deliver a seamless national economy. Thirty-six separate reforms were covered by this agreement, comprised of 27 deregulation priorities, eight areas of competition reform and reform to regulation making and review processes. As of July 2012, 17 of the deregulation priorities and three of the competition reforms were complete. Then, in May 2012, the Productivity Commission assessed 17 of the Seamless National Economy reforms in its report Impacts of COAG reforms: Business regulation and VET. The Productivity Commission suggested that the 17 reforms that it modelled could increase GDP by around 0.4 per cent, which represents over $6 billion per year, and reduce business costs by around $4 billion per year. That is real reform—real assistance to the community and real assistance to small business. And we did that as part of normal good government. A very good example of this reform work was Standard Business Reporting. SBR commenced on 1 July 2010 and it offered Australian business, accountants, bookkeepers and tax agents a quicker and simpler way to lodge reports with government. The Productivity Commission estimates $500 million worth of potential benefits from this reform over nine years. SBR simplifies business to government reporting by removing unnecessary or duplicated information from government forms, using business software to pre-fill forms automatically with relevant information, providing an electronic interface to report to agencies directly from accounting software and providing a single secure sign-on for online users. Many people in the community may not even know that exists, and that is a really good thing if it is done seamlessly. It is about business doing better business with government; it is about the Seamless National Economy agenda and it is about keeping our economy progressing forward. It is about assisting small business in quiet but significant ways, not just having the vain bonfires of empty pages of regulations so outdated that they are completely meaningless—but perhaps that is for another time.
It was the former Labor government that introduced the National Business Names Registration Service for a single online registration process, removing the requirement for a small business to register in each state or territory, lowering the cost to business from over $1,000 for registering in each jurisdiction to under $100 for a single national registration. For the first time it could be done 24 hours a day, seven days a week, 365 days a year, for the convenience of small business—again, a truly great reform. It was a difficult, costly and complex reform but one that Labor undertook and did very well. So successful has that reform process been that the current government is now talking about privatising it and selling it off, because it is making so much progress and doing such a great job. Again, that is a debate for another time. It was the former Labor government that introduced the Small Business Superannuation Clearing House, enabling small business to pay all their employee super contributions to a single location
These are good changes—good reforms that have made an enormous difference to small business. Labor is really proud that we not only came up with these ideas but also implemented them.
Talking of small business and the important changes contained in this bill and making business for small business easier, there are many other reforms that Labor put in place in the same spirit. There has been a lot of debate about supporting small business lately. Of course 'lately' is 'just lately' for the government. For Labor it has been a longer term proposition—in government, particularly, because that is when we have been able to actually deliver real reforms and real assistance, particularly in those difficult dark days of the global financial crisis. In particular, we understood the need for cash flow assistance to small business.
We have seen the government now place asset write-off measures in the budget, and Labor will of course support these measures. We have done that in the quickest possible time frame given to us by the government's timetabling and scheduling of their own bills in relation to this. Labor is very proud to be able to assist the parliament to be able to deliver on these in the timeliest manner. Let it not be said that Labor delayed in any way any of these measures by even one minute, because that simply has not been the case. Labor has in fact moved to expedite this and lend any assistance possible to the government, recognising that the damage that the government did in its previous budget, a little bit over 12 months ago, now needed urgent—'emergency', in the government's own words; one might say 'crisis'—repair of the damage they did in that previous budget. So Labor was very enthusiastic about supporting the government's new-found will to actually support small business. We were very pleased to be able to do that and to see that assistance actually reach small business.
But it was also a Labor government that introduced the instant asset write-off. The exact same policy that the government now uses and says is completely new was the exact same one that they took away just a bit over 12 months ago. In fact, they have not even changed the name of it, which is the really curious bit. But it was Labor that increased the instant asset write-off from $1,000 to $5,000 and then further increased it to $6½ thousand—a really good number; a really good measure of where the majority of small business actually expend funds. This was a really good setting. We are very supportive of the $20,000 that the government have now capped it at; we think that is good as well. But, like government, we will acknowledge: you can only spend money that you have; otherwise, you have to borrow it. I certainly would encourage small business to make the best use of the accelerated depreciation assistance that is in place but of course to be very careful and to seek advice on how they do that. Unfortunately, it was, though, a Liberal government that cut it back just recently to just $1,000. This was a retrograde step. This was something that was very bad for small business—something that made small business reel with uncertainty but also created this environment of a loss of confidence that was reflected in many, many consumer surveys and small business surveys. The government would have been sitting and scratching its head over how it would repair the damage that the government had done—some, in part, in this most recent budget. 'A lot', some would say, but 'a lot late' others would say as well.
Of course they did not support it when Labor introduced the exact same things. Then, when they did get elected, they did cut back those same measures, because they said they were unfunded—that is right, they said they were unfunded, and they said that there was just no money for these measures so they would have to cut them. As to that principle: at the time when they cut them the deficit was some $17 billion; now they have reintroduced an even higher cap rate of $20,000, but curiously the deficit now is larger under the Liberal government. The Liberal government inherited a smaller deficit—around the $13 billion mark. It was a $17 billion deficit in their first budget. And now, according to budget paper No. 1, it is $35 billion. The deficit has gone up not once but twice, and significantly in anyone's terms. If, at the time, at $13 billion, this was an emergency which needed fire engines to come and put out the fires of emergency and crisis—or even, let us say, at $17 billion—then that a deficit apparently now at $35 billion is sort of okay is curious thinking. I would have thought it was slightly worse, given that it has doubled. Interestingly, on that, you would question: where is the money coming from to fund these things? Well, the debt has actually got bigger as well. That would not surprise people.
But the debt has actually really blown out. It blew out between budgets—two Liberal budgets, of course. In two Liberal budgets, the debt has blown out to $35 billion. It is quite substantial. It is huge. And this adding to the debt of course does create some problems. I will not do it here because I will not have time in the minutes I have left to fully explore these things in depth, but some might ask the government legitimately—
If the government member does not want to extend my time, I am glad to accept that. But if the government legitimately says: 'Where is the money coming from and how are they funding this?' then the only possible answer is that they are borrowing the money. Of course, if you do the sums, you would have to say that the government is now borrowing twice as much, because the debt is much bigger—the deficit has doubled. So this is curious accounting. I am sure plenty of accountants and economists can work it out and ask the government—and I will not do that here—where they are getting the money from, because I cannot quite see where the money is coming from. It seems to me to be coming from borrowings. But then again, I am not an expert or an economist.
So not only did the Liberal government cut the instant asset write-off and Labor's other tax assistance measures designed to help small business, but they did this in the face of really strong criticism and opposition from the small business and business sectors who actually told the government and the Liberal Party that they had really got this wrong and they should actually reconsider.
So, winding back the clock, as they did, and realising the error of their ways, the government have changed and we agree now that what the government is doing by reintroducing Labor's package of small business assistance is a good idea.
Labor's record on tax assistance goes much further and deeper for small business. And it is a good record. Not only did Labor introduce the instant asset write-off but it also introduced the tax loss carry back, which, for the first time, meant that companies could claw back tax that had previously been paid—tax paid in the past—against any write-offs they might have in the future. This was a really important assistance measure for small business. What it did was to recognise both small businesses that are of a company structure and those that are not. So there were different measures. There was accelerated depreciation for some small businesses and other measures like tax loss carry back for others.
We also recognise the need for small business and business to accelerate their depreciation for motor vehicles. Not only would this help them but it would also help the motor vehicle industry and a sector also reeling from difficult times.
Of course, those difficult times have not gone away. What we are seeing now is that the government should somehow be responsible—they are coming up to nearly two years in government—for trying to assist the economy and making sure that (a) people do not lose their jobs and that (b) small business survives. The strongest thing, as we would all acknowledge, that you can have in a good economy is a job. It is important that the government pay much attention to these factors.
Labor's tax assistance, of course, was for four years. When we put our measures in place we made sure that we gave business that certainty—that forward estimates certainty of four years. Curiously again, this Liberal government has only done it for two years. That is a very short time frame for business to operate in. You would find that most of them do their planning over many years, not just two years. It might suit the government in, let us say, a political cycle rather than an economic one to put forward only a two-year time frame. I know that businessmen I speak to say that they would much prefer more certainty from this government and that four years would be much better.
When it was combined, Labor's tax assistance was worth more than $5 billion over the forward estimates. Labor increased the instant asset write-off threshold from $1,000 to $6½ thousand, as I said earlier, and the number of assets that this applied to was unlimited. Our accelerated deductions for motor vehicles, loss carry-back for companies and the three tax assistance measures for small business provided a significant boost to small businesspeople and their ability to grow and to employ more people.
As an aside, but also related to this: it was Labor that gave one of the biggest tax breaks for unincorporated small business by tripling the tax-free threshold from a bit over $6,000 to $18½ thousand. This was a really important measure and gave significant cash flow assistance to small businesses—particularly microbusinesses. If we are going to have a coffee-machine-led recovery, as the government often talks about, then let it rain coffee machines! I am happy about that; I like my coffee as much as anyone else. But I think that what small business looks for is something a little more substantial from time to time—perhaps some real significant tax measures, like Labor's tripling of the tax-free threshold. Not only did that assist ordinary people and consumers but also small business as well.
Again: good, solid ideas, well implemented, did enormous service to our economy. I would really hate to think what our economy might look like today, and what the face of small business might look like, if Labor had not put all of these very serious measures in place. At the end of the day, the reality is that a government needs to have a vision for the future, a vision for innovation and a vision for jobs. That is certainly what Labor has done and what Labor continues to do, whether we are in government or we are in opposition.
Sadly, today unemployment is trending up and the long-term unemployment rate is unacceptably high. Sadly, this government has given up on the long-term unemployed. Australia currently spends around $30 billion annually on R&D across all sectors, and it is ranked 17th in the world by the Global Innovation Index. However when it comes to our efficiency at converting research dollars into innovation and commercial success we perform poorly, ranking 116th out of 142 countries. When you look at that data I do not think that would match up with everyone's interpretation of Australians being the great innovators and inventors, doing all those great things. In other words, more needs to be done. That is what this government ought to be doing.
Sadly, there is nothing in this budget for small business that will drive innovation, even though the minister likes to talk about it a lot—about how the government is going to help small business by removing obstacles to crowd-sourced equity funding, as one example. In fact, the minister has issued numerous media statements over the last 12 months, talking about what the government plans to do—what they are 'gunna' do. I would remind the minister and the government that it was Labor that consulted with the start-up sector last year on crowd-sourced equity funding, led by my colleague Ed Husic, and then released a discussion paper in 2014. Labor also supported the government's proposed changes to tax concessions for employee share schemes, and Labor has a proud record of supporting innovation.
The Leader of the Opposition, Bill Shorten, announced several initiatives in his budget reply address that have been welcomed by small business. The new $500 million Smart Investment Fund is a great Labor initiative for small business. It will do a lot to bolster the way in which small business can innovate and grow. I have heard a lot of talk from the Liberal Party and the government about how they want lots of businesses to start up. I think that is a good idea; we should have as many starting up as possible. I would add something to that and say, 'We should have as many of them survive as possible as well, not just start up.'
Unfortunately, the government might want to 'launder' the data on starting up and say, 'Look how many are starting!' But they might run and hide when we see how many might also be failing. I think an important task for government would be to undertake policies that help not only in the start-up phase but in the growth phase and the employment phase, which transform a small business from being a non-employing small business—and I would like to see lots of them as well. The government need to be really cautious in the way that they scare small business when they talk about a so-called number of 519,000 job losses in small business. In reality, if you look at that closely you will understand that the 519,000 were a transfer: non-employing small businesses were taken out of that category—being listed and numbered in a register there—into a different category, meaning that they now employ someone.
We would like to see more non-employing small businesses become employing small businesses. I think that would be a fair thing. I think that it would be a really fair thing for the Australian economy if every non-employing small business could be encouraged and grow sufficiently to be able to sustain themselves and also employ someone. I would like to see that number showing even more transference from non-employing to employing; I think that is a good thing.
But we need to be careful about how we look at these numbers. From time to time I hear the minister talking about this 'loss' of jobs—that they were lost! A transfer is not a loss. They did not actually disappear; that 519,000 are no longer counted in this column, they are counted in another column. If you have a look at the numbers, where one reduced the other grew by that number. If the total pie—and this might be a little complicated for the government—of small business actually got bigger, so that there were more, then you cannot say that there were losses as well.
Inside that pie, some slices may have changed size but the overall pie got bigger. I know this is a nuance and that the government may not quite be able to work its way through this, but it is really simple: more is—
They will get it—yes. More is less and less is more. The reality is that if you have a pie and you make the pie bigger, you cannot say that people lost jobs within the pie. There are actually more jobs. There are actually more small businesses.
The other curious factor about these things is that was done at a time when the economy was actually going through its most difficult period—through a global financial crisis. If you were to look at government spending, you might think that during a period of a global financial crisis a government might spend more. In fact, it might have record levels of spending. And Labor certainly was very enthusiastic about supporting the economy and jobs because we understood that the best way you could inoculate yourself against the shocks of a global financial crisis was to make sure the economy was strong and people kept their jobs. If you kept your job, that meant you could pay your mortgage and it meant the economy would keep going and that is exactly what it did. Those spending levels at that time were really important because it did underpin the economy and people's jobs. I think we did a really good thing.
You might be a bit surprised today if you realise that this big spending Liberal government that we have got—big taxing, big spending—are now at record spending levels in non-global financial crisis times. You would have to ask where they are spending the money. What is driving that enormous amount of spending? You could understand it during a really big crisis. The problem with having the crisis levels of spending that the government have in place right now is how can the economy afford it? We could maybe work through it, but the problem is if there is another crisis down the track, can we really trust this government that are already spending at crisis levels now when there is not a crisis? I hope there is not one, but at least maybe there should be some redundancy planning around what the government might be forced to do if there were to be some sort of a need for the government to spend. As you can see, it is not as rosy a picture as the government might want to portray.
There is a range of things that the government has done that we would obviously support that are really important, particularly in terms of the bill that is before the House in making some administrative changes to superannuation guarantee. They will help the government to navigate around some of these issues. At the same time, we need to acknowledge that for small business—because this is who we are talking about—there are a number of things that the government has done alongside these things. In particular, they have cut more than $2 billion—that is a lot of money—from skills and training programs. You would think that at a time when there is pressure on employment and unemployment is trending up—it is over six per cent, which is too high for any government and it should be much lower—that you would perhaps take some of that record crisis spending and you would spend it on skills and training, because that is what in turn will pay back the economy and will pay back small business.
Small business will regularly tell us that there are a number of top five things that they are most concerned about. Cashflow is always in the top five, as you would expect, and the other one is spending on skills and training, because if they are wanting to transition from being a non-employing business—or even an employing small business; a microbusiness—to someone who is going to employ they are looking for the right skill set. They want really good, well-trained, skilled people, so that they can have the confidence to grow their business. That confidence, unfortunately, has been shattered by the cutting back of more than $2 billion from those programs.
While we are on the subject of small business and how they manage through and navigate through difficult times, in terms of start-up finance there are some important issues that also need to be raised. Labor are very determined that it will work with the financial sector, the banks and finance industry, to establish a partial guarantee scheme, a start-up finance scheme to help more Australians convert their great ideas into great businesses. We think that is another great way to underpin our economy. Not only then do you provide that sort of start-up funding, you do it in partnership with industry and with the finance sector; you also do it in partnership with government and with people who actually know the business, know the industry and who are not just relying on government to pick the winners. This will enable entrepreneurs to access the capital they need to start and grow their enterprises. We think that is a very positive way forward.
We have also announced that we will work with government. There is the opposition's invitation to the government to work with us on a fair and fiscally responsible plan to reduce the small business company tax rate not by 1½ per cent but a full five per cent. We think that can be achieved and it can be done. It can be done in the context of good government, responsible spending and saving. It will do this, without doubt, and it will boost confidence. It will boost the economy and in return it will mean that the government has more tax receipts, so there will be further revenue from government by reducing the tax burden on small business company tax that they pay. These are very good things. Labor have extended the olive branch in these areas and said, 'Work with us as we will work with you when it comes to supporting small business.' We are yet to see the same sort of goodwill in return that Labor have extended, but I do await eagerly for that to happen.
The bill that is before the House is a good bill. Labor will be supporting it. It goes some small way to clarifying at least the government's position on superannuation. Although, as I have noted in the past, in other areas of superannuation the government has a very poor track record. Coming to government, one of the first things they did was remove the low-income superannuation contribution to something like 2.7 million low-paid workers—people who earn less than $37,000 a year. It was only a small tax anomaly, up to $500, that Labor had rectified and that the government has put back in place. This is an anomaly that will again have to be fixed at some point. The government know and understand that. It was also the Liberal government, when they came to power, that were the first to delay significantly, by a number of years, the superannuation guarantee from nine to 12 per cent. These are again things that will have to be corrected in the future.
I am very interested to hear some of the comments made by the previous speaker, the member for Oxley, in relation to small business and his support for some of the initiatives that the government is doing. I have the greatest respect for the member for Oxley. He might not know that. In a previous life, prior to becoming a member of parliament, in 1998 he worked as an aircraft electrician with the Royal Australian Air Force. Anybody who works with the RAAF is indeed worthy of my respect, as a member who represents the only inland city in Australia with all three arms of the Defence and Forest Hill RAAF Base, which the member for Oxley I know is very familiar with. I can hear him say he is very familiar with it and I am very interested to hear that.
I hasten to add though, however, that he ought not lecture this government on its small business record and indeed its small-business ministers because Craig Emerson; Senator Nick Sherry; Senator Mark Arbib; the current member for Gorton, Brendan O'Connor; the current member for McMahon, Chris Bowen; and the current member for Brand, Gary Gray all held the portfolio of small-business minister during those six sorry years of the Rudd-Gillard-Rudd government. The member for McMahon was there but for a short 49 days. The member for Dunkley, the current Minister for Small Business—in fact the 15th since the position became a ministry in 1988—has been there already one year 264 days and what a difference he has made. He has done more in that one year and 264 days, I would argue, than the previous six Messrs Emerson, Sherry, Arbib, Bowen, O'Connor and Gray did in the six years.
Just today the Senate approved the cut of 1.5 per cent to the tax rate for small business—
to 28.5 per cent, the lowest company tax rate since 1967, the lowest for almost half a century. That is going to provide great incentive to those many small businesses throughout my electorate of Riverina and, indeed, dare I say, those small businesses throughout the electorate of the Assistant Minister for Employment, the member for Cowper, who joins me here at the table. Whilst I mention him, I should also talk about the great work he is doing in the employment sector to create jobs, particularly for the engine room of our economy and that, we all know, is small business.
The Superannuation Guarantee Administration (Amendment) Bill 2015 is another example of the coalition's commitment to small business. The new instant asset write-off provides an incentive for small business to invest in new equipment, to back small-business ingenuity and vision and as the Treasurer, the member for North Sydney, has said many times at this spot, to have a go. It will benefit small businesses regardless of whether they have employees or not. I heard the member for Oxley talk about those small businesses which in fact do not employ people and the encouragement they ought to be given to hire staff. I thoroughly concur with him in that respect. There is no doubt that employing staff is a significant step for any small business. It can help a business expand but it also brings with it new obligations, new complexities.
Big business will typically have a human resources department. It can justify the expense of having a corporate area dedicated to activities such as payroll, workplace health and safety, and superannuation compliance. As someone who ran a small business for eight years, I know what it is like to be your own HR manager, your own chief financial officer, your own chief information officer and chief executive officer all rolled into one.
Not quite, but we did turn a very small business operating out of three garages in Wagga Wagga into quite a profitable little business which is still going.
Mr Ripoll interjecting—
Thank you, member for Oxley. That independence is one of the reasons so many entrepreneurial Australians go into business for themselves—to be their own boss. The measures in this bill will make it easier for small businesses to comply with their superannuation obligations and that is so very important. We recognise that it is important for employers to do the right thing by their employees as far as superannuation is concerned. In my experience, most of them do. This bill does not lessen the obligation on any employer to do the right thing by those people who they take into the trust as their employees. But it will make the compliance task easier, more efficient.
One of this government's early actions upon coming to government was to move the Small Business Superannuation Clearing House to the Australian Taxation Office, out of the Department of Human Services and into an agency which most small businesses are already familiar with in relation to tax and superannuation matters.
In introducing this bill on 28 May, the Minister for Small Business, the member for Dunkley, informed the House that between 1 April 2014 and 30 April 2015 around an additional 42,500 employers have registered to use the service, bringing total registrations to 100,000. That is a very commendable and good result. One of the big attractions of using the clearing house is that if your employees belong to a range of different superannuation funds, which often happens when you have people moving around in and out of different jobs over a period of time, then you only need to deal with the clearing house—that is all. You do not need to interface with multiple superannuation funds. So that is going to make it more streamlined and simplify things, which, for time-poor small-business operators, is so important because they need to spend every precious moment doing what they do best—that is, serving customers, making things and getting on with the job of trying to eke out a living. They do not need to be burdened with unnecessary paperwork and unnecessary compliance. So that is why the coalition, which understands small business, which understands how important they are and which understands how time-poor they are, is getting on with the job of helping them in every single aspect of doing what they do best.
As a small business, you have the certainty that once the clearing house has received your contributions then your job is started and you have complied with your obligations up to that point. The clearing house takes on the responsibility for dispersing contributions according to your particular instructions. Currently the clearing house is available only to businesses with fewer than 20 employees and that takes into account a lot of them. But from 1 July 2015, we are expanding access to this service so that any business with a turnover of less than $2 million—the definition of a small business for income tax purposes—will be able to use this service. So whether your turnover is less than $2 million or whether you have fewer than 20 employees, from 1 July this year you will be able to use the Small Business Superannuation Clearing House. A small business obviously needs to spend some time getting itself acquainted and registered with the clearing house, but compare that to having to register with multiple superannuation funds. Again, there is that level of cooperation that we are placing in small business, that level of simplification that we are bringing about in this policy change. I encourage any small business that is not yet using the Small Business Superannuation Clearing House to check it out online and think about what it might be able to do assist them. It is a free service offered by the government and just one way in which we are supporting Australian small business to have a go. It is one click away. Check it out online, and you will be amazed at how easy it is to access and to use and by the fact that it will give you more time to do what you do best in your small business.
The key change that this bill makes is to amend the law so that employers no longer have to provide a standard choice of fund to temporary residents. Currently, a failure to supply a temporary resident whom the business employs with a choice of fund form can leave the employer liable for penalty. This bill does not remove a temporary resident's right to exercise choice in relation to the fund which they would like their superannuation directed into, but the reality is that many temporary residents do not already have an existing superannuation fund in Australian and are unlikely to exercise choice of fund in the relatively short time they are in this country. That has implications—certainly for the Riverina.
I would like to point out that in the minister's 28 May introduction of this bill one of the changes he talks about is employers no longer having to provide a standard choice form to temporary residents. He said:
A standard choice form allows employees to nominate their superannuation fund. Generally employers have to give this form to employees within 28 days of the employee starting their job.
I would like to emphasise that the government is not taking away the right of a temporary resident to choose a superannuation fund. What we are doing is simplifying the paperwork requirements for businesses that employ temporary residents such as those on a working holiday visa.
Under these changes, employers will no longer have to supply a standard choice form to temporary resident employees. It also means time-poor small businesses will no longer have to spend time explaining how to complete the form.
This change will also make it easier for employers to pay their workers' superannuation on time.
He went on to comment:
The majority of businesses in these sectors are small businesses. Around 92 per cent of businesses in hospitality and 99 per cent of businesses in agriculture are small businesses.
That affects the Riverina electorate I represent because many of them employ seasonal pickers. Once they have picked the apples in Batlow, they move west and into the Murrumbidgee irrigation area around Leeton, Narrandera and Griffith to pick grapes and do all the sorts of things that great food bowl of the nation does. Quite frankly, at any given harvest time in the Riverina they simply would not be able to get their crops off if they did not have those seasonal workers, many of them on short-stay holiday visas. Those backpackers are invaluable to the Riverina—indeed, to many rural and regional electorates right throughout Australia.
This legislation is important.
Mr Husic interjecting—
Be quiet, member for Chifley! It is important that people know of these changes and it is important that employers avail themselves of these changes, because it will mean a streamlining of the obligations that they currently have. The change is established to result in an annual compliance cost saving of $45 million. It removes the threat of a penalty on a business merely for failing to give someone a piece of paper. This means that employers can focus on doing the right thing by their business and their employees and less on ticking boxes dreamt up by bureaucrats. That is important. It might not mean a lot to the member for Chifley, but every dollar helps to pay down that debt and deficit legacy that his previous government left the country—not the government but the country, the fine taxpayers, the fine small business people of this nation.
I am pleased to inform the House that this will make a big difference—it will make a huge difference—to business operating in the Riverina, particularly the fruit growers who rely—
I would like to, but he's facing me! And we make a very good latte, let me tell you!
I am very pleased to inform the House that, as I said, this will make a big difference to businesses operating in the Riverina—those operating the latte cafes and particularly those farmers who just want to get their crops from the trees and the ground, to get them into the trucks, to get them to port and to ensure that the food and fibre that my area produces gets to market as quickly as possible whilst at the same time protecting those backpackers who are picking those crops. Those fruit growers in particular rely heavily on temporary residents to meet their labour needs associated with their annual harvest. That is why it is so important not just for the Riverina but indeed for small businesses right throughout Australia. With that, I commend the bill to the House.
Thank you for the opportunity to speak on the Superannuation Guarantee (Administration) Amendment Bill 2015. As speakers before me have said, the bill removes the obligation for employers to offer a choice of super fund to temporary resident employees or when super funds are merge. This bill is all about reducing the burden for employers. That is why both sides, whether it be the member for Oxley on my side or the member for Riverina just now, have spoken at length about the positive consequences of this bill for business in Australia and particularly small businesses. They are right to point to those advantages.
I thought that, before I got into the various specifics of the bill, I might spend some time instead on the superannuation guarantee itself, because I think compulsory super and the SG, as it is called—the superannuation guarantee—are one of the most substantial public policy triumphs in Australia since Federation. I am proud to say that the labour movement—the Labor Party—was instrumental in setting up the first retirement income schemes in Australia a century ago.
By 1945, the Chifley government set up the National Welfare Fund, which was intended to be the basis from which a national super fund could be operated. By 1973, the Whitlam government responded to the fact that only 32 per cent of workers were covered by super at that time, and they initiated the national superannuation inquiry, chaired by Keith Hancock. By 1983, the Hawke government reformed superannuation tax concessions to remove overly generous concessions for the wealthiest Australians—remembering that super was still not yet compulsory in 1983. It was the same for 1986. The Hawke-Keating Accord implemented a series of reforms so that, by 1986, awards stipulated that three per cent employer super contributions would go into industry funds.
By 1991, Paul Keating, who was then a backbencher, delivered a speech that said:
Unless we can move - and move rapidly - we will put the Commonwealth Government age pension system under unbearable stress and condemn an entire generation of elderly people to an unsatisfactory and poorly provided retirement.
Around 1991, Keating proposed a compulsory super system. I quote from him again. He said:
… I suggest that by the year 2000 we reach a national benchmark where each and every employee has a contribution to superannuation equal to 12 per cent of wage and salary income paid into his or her superannuation account.
At the same time, he warned:
It is the difference between a full, active life and a life governed by budgetary exigencies and the vagaries of politics.
As you would probably recall, Madam Deputy Speaker Burke, or members of this House will recall, Keating's speech kicked off a wave of support for universal superannuation. A few months later, the Labor government would announce a universal super scheme, which Keating would then improve on in the years after that. In the speech that he gave in 1991—and the member for Chifley, who is at the table, is also an avid follower of the words and deeds of one of our finest prime ministers and certainly one of the finest Labor treasurers we have had—he was both right and prophetic when he said the demographic challenges of an ageing Australia would put the Commonwealth budget under considerable pressure.
That is one of the reasons why Labor under Prime Minister Rudd introduced a phasing in of a 12 per cent superannuation guarantee. I pay tribute to the work of the members for McMahon and Lilley for implementing that policy in their time in the Treasury portfolio—a very important change, a 12 per cent superannuation guarantee. And then, under Prime Minister Gillard, we had the MySuper package introduced to try to lower superannuation fees.
But Paul Keating was also prophetic in that he said that, until the superannuation project is complete, until we reach a point where most Australians can depend on their own savings to retire comfortably, their retirement incomes will be under political attack from the members opposite. He was absolutely spot on. We have been seeing that in the first and second budgets of this current government.
Indeed, right through the history of super, the Liberal Party have stood in the way of a stronger super system. In 1976, the Fraser government rejected the Hancock inquiry recommendation of a universal pension system. In 1996, the Howard government abandoned the plans to increase the super guarantee, costing the average Australian worker something like $250,000 over their working life. At the time, the now Prime Minister, Prime Minister Abbott, said:
Compulsory superannuation is one of the biggest con jobs ever foisted by government on the Australian people.
If you think about that, the current Prime Minister of Australia thinks that superannuation, one of the big public policy triumphs in Australian history, is a con job. That quote will sit on the record forever. It is a good illustration of what those opposite think about superannuation and the possibilities and opportunities of super for Middle Australia.
Twenty years after that quote, his government announced a freeze on the super guarantee for another six years. They also announced that they are scrapping the low-income superannuation contribution from 1 July 2017. If you just take my communities for example, the cuts to that low-income superannuation contribution will affect 28,300 people just in my electorate alone. You can imagine the magnitude of the hurt that is being inflicted on people right around Australia when you consider that almost 30,000 people just in my electorate of 100,000 or so will be adversely affected. The aggregate outcome of these sorts of cuts and these sorts of decisions is that the national savings pool, Australia's national pool of savings, will be $45 billion worse off by 2021 and $983 billion worse off by 2055.
Labor does recognise that there is a real need to improve the superannuation system in Australia. We can always do more to make it better, fairer and more sustainable. We do need to recognise that, with people living longer, they need to save more before retirement, particularly if they want to maintain an adequate standard of living. We do know that the current level of contribution is not sufficient to support Australians' lifestyle expectations for their future retirement, and that is why we think we need to increase the super guarantee to 12 per cent, which is what was initially proposed by Paul Keating, wound back by John Howard, reintroduced by the members for McMahon and Lilley and wound back by the current Prime Minister, Tony Abbott.
The coalition alleges that any increase in the superannuation guarantee is not affordable for employers. The facts do not bear out that assertion. It is not the first time that the facts have inconveniently got in the way of a political strategy. But the past experience shows that any increase in the SG is not likely to have a negative impact on business, on employment, on the CPI or on any of the measures that we pay close attention to when we implement changes of this magnitude. So what is really going on here, when you take a step back, is that the coalition, when it comes to the super guarantee, is really trading off a short-term fiscal fix for long-term benefits for Australians. The net fiscal cost of compulsory super to the government, estimated by Treasury, will peak at less than 0.5 per cent of GDP before gradually falling to less than 0.2 per cent of GDP. In comparison, the current fiscal cost of the age pension is projected to increase from around 2.7 per cent of GDP to around 3.9 per cent of GDP by 2050 if no changes are made to the current superannuation settings.
Increasing the super guarantee is also good for the Australian economy more generally. Modelling done for the Association of Superannuation Funds of Australia has shown that an increase in the SG will—this is a 12-year horizon—increase investment by 1.3 per cent, increase exports by 1.04 per cent, increase capital stocks by 0.9 per cent, increase the real wage by 1.06 per cent and increase real GDP by 0.33 per cent. What that shows is that the government's attacks on the superannuation guarantee are not just bad for workers—especially young workers today, the vulnerable and people on low incomes—but also bad for our economy more generally.
When Labor sat down to consider this bill, we did so knowing that this is a government and a Prime Minister who are not interested in improving the superannuation system more broadly, in growing super investment or in making the superannuation system fairer. On the two sides of the House we have vast differences about superannuation. We have had them for some time. When it comes to the big building blocks of super, those differences will continue. When it comes to this bill—a very specific bill which does not compromise the broader system of superannuation and indeed improves the situation for business, including small business—as the member for Oxley flagged in his excellent contribution, we will be supporting the specifics of this bill.
The measures in this bill remove the obligation for employers to offer a choice of super fund to temporary resident employees or when super funds merge. Many temporary resident employees do not currently exercise choice of fund or complete the choice of fund form and are therefore placed in their employer's default super fund. Under the new arrangements in this bill, temporary residents maintain the right to choose a super fund but employers are not obliged to give the standard choice form to employees. Small businesses have identified this as a burden on their paperwork, so we are willing to do what we can to make this easier for them. This bill also removes this responsibility for employers when super funds are merged. We recognise that forcing employers to offer certain forms at that time is unnecessarily burdensome for small businesses. Importantly, as I said before, none of these measures will interfere with the responsibility of employers to provide superannuation guarantee payments for their employees.
So Labor will support the Superannuation Guarantee (Administration) Amendment Bill 2015. Labor, as you know, is always looking for sensible ways to ease the administrative burden on small businesses, and these appear to be sensible proposals put forward by industry. Labor is the champion of super. We always have been and we always will be. So, more broadly, we will continue to oppose the Abbott government's attacks on super and we will continue to fight for a stronger, fairer super system for all Australians. That includes improving the superannuation concessions, which right now unfairly benefit the very wealthiest in our society at the expense of middle Australia.
Today is a red-letter day for small business, with the Senate approving the tax cut for small business companies. It has also approved changes to the small business instant asset write-off. We have seen the small business company tax rate cut to its lowest level in almost 50 years, since 1967, and all small businesses are given an immediate tax deduction on any asset they buy costing up to $20,000. This gives small businesses the capacity to invest further in themselves and also to offer more employment to both young and mature-aged Australians, which is what they do out in regional and rural areas. I want to acknowledge the commitment of the Minister for Small Business, Bruce Billson, and also the Treasurer, Joe Hockey, and the Prime Minister, in this process.
There has been an absolute commitment to small business, and the Superannuation Guarantee (Administration) Amendment Bill 2015 continues that work. It introduces changes to simplify the superannuation choice regime used by employers and employees, reducing the business compliance costs by simplifying when a standard choice form must be provided to an employee by an employer. This is a further reduction in red tape for small business, something they are crying out for. Small businesses, as we know, do not have dedicated human resources people, and small business owners are extremely busy working in their businesses. So this is an important measure for them.
The Superannuation Guarantee (Administration) Act 1992 requires employers to offer a choice of superannuation fund to employees. An employer satisfies this requirement where they make superannuation guarantee contributions to a fund chosen by an employee or, if the employee does not make a choice, to a default fund chosen by the employer and specified in a standard choice form provided to the employee. Employers must give employees a standard choice form within 28 days of their employment commencing. Employers who do not comply with their choice of fund obligations may be liable to pay the superannuation guarantee charge for given employees.
The requirement to provide employees with a choice of super fund is particularly burdensome for employers who employ a large number of temporary residents. This includes many businesses in my electorate of Forrest. The horticultural industry have long been reliant on travellers and backpackers. They have just struggled so hard to get workers. They have needed these people simply to provide the basic labour to harvest their crops—to pick and to pack. They literally cannot harvest—they have not been able to harvest at times—without backpackers and travellers. When you look at other industries—such as the dairy industry, which is struggling to find those who will milk cows, and abattoirs—the same sort of situation arises. This is really apparent in my electorate of Forrest in and around places like Donnybrook, Busselton, Myalup, Harvey and Cookernup, where a range of fruit and vegetables that rely on labour-intensive hand picking are produced.
The compliance burden on those small producers who use backpacker labour is extreme. Often these producers are simple small businesses—a couple or a family business. Many of the backpackers only stay in the region for a couple of weeks, and they are generally on good wages. Many producers are paying in the vicinity of $25 an hour for these workers. I compare this to what I read recently: the same sorts of workers in New Zealand are perhaps paid around $13.20 per hour, or $12 in Germany, or $7 in Israel, or $5 in Taiwan. This means that in Australia they earn a good wage for a relatively short period, grossing perhaps $1,000 for a 40-hour week. Employers have to pay 9.5 per cent superannuation when an employee is paid $450 or more before tax in a month. The worker staying two weeks and earning $2,000 is therefore due $190 in superannuation—perhaps not a large sum, but many producers are forced to set up numerous small superannuation accounts for temporary workers who simply do not have those accounts. Those accounts generally end up with a few hundred dollars in them, and those few hundred dollars can be eaten up by fees. So what we see here is a lot of churn, often for very little result.
Many temporary residents do not have existing superannuation arrangements and, given the short-term nature of their employment, they are unlikely to choose a fund. It is similarly another burden for employers to be required to provide employees with a standard choice form when an employee's superannuation benefits are transferred to a successor fund under a fund merger arrangement. The amendments contained in this bill will simplify superannuation compliance obligations for employers in these circumstances as well. Employers will no longer have to provide a standard choice form to a temporary resident employee or when super funds merge, nor will they need to allocate time explaining the importance of completing the form and how to do so. Previously an employer who did not provide a standard choice form to employees in these situations may have been liable for the choice shortfall penalty.
These changes will reduce compliance costs for businesses operating in industries that employ a high volume of individuals on working holiday visas, such as hospitality and agriculture, which are very prevalent in my Forrest electorate. Of course these people are prominent in tourism as well. I remember being in the little town of Augusta. A lot of tourists go there. Going back a couple of years, I remember going to the local bakery and them saying that they simply could not survive without these workers. They rely on these workers simply to keep their business doors open. They have to have these workers because there are none locally for them. It is the only way they can continue to operate their business.
Employees in these situations though retain the right to choose a super fund if they wish to do so. Where benefits are transferred from an employee's chosen fund to a successor fund, the successor fund is taken to be the chosen fund for the employee and the original fund is taken to no longer be a chosen fund. This means, in simple terms, that contributions the employer makes to the successor fund for the benefit of the employee satisfy the choice of fund requirements and the employer will not need to give the employee a standard choice form. Where benefits are transferred from a default fund to a successor default fund, the successor default fund is deemed to be the fund specified in the standard choice form for a given employee. This means that contributions the employer makes to the successor default fund for the benefit of the employee satisfy the choice of fund requirements and the employer will not need to give the employee a standard choice form. A fund is a successor default fund if certain requirements are met. This includes that the employee's interest in the fund is transferred to a new fund without their consent, the original fund was a default fund specified on the standard choice form provided to the employee and the new fund is a successor fund within the meaning of the Income Tax Assessment Act 1997. These amendments do not affect an employee's ability to choose their own fund under division 4 of part 3A of the Superannuation Guarantee (Administration) Act 1992.
When you are a small business anything that simplifies the processing of superannuation is a very good thing. Reducing that ongoing red tape burden for small businesses is a commitment that the coalition has made. Of course there is more to be done on reducing red tape. As I have said repeatedly in this House, small businesses often actually employ young people in their very first job and often they employ people at a very mature stage of their employment. They employ people throughout the ages. It is small businesses that often give these people a go. We see them in small rural and regional communities. So often these businesses are undervalued and perhaps under respected in the broader economic sense. They keep our small communities operating.
I am a farmer and the small businesses in my community are always there when I need them. Their doors are open and they are there for me with whatever it is I need on my farm or in my home. Often they are also the people who support our local sporting clubs. They provide the prizes and sponsorship. They are committed to their local community. They support community service organisations and local volunteer groups. Emergency services groups rely on small businesses in their community to provide their employees. When there are emergencies people can bolt from a small business and take care of the emergency, whether they work as a volunteer ambulance operator or in fire and emergencies services. It is the people in the small businesses in our communities who support that sort of activity that keeps our small communities operating.
Having a massive number of small superannuation accounts with almost nothing in them is really a concern and a waste of time and money for everyone, perhaps with the exception of the super funds that collect the cash. There have to be better ways. I am very pleased with the total of our jobs and small business package. As I said at the start, today is a red-letter day. We saw the measures go through the Senate. We saw the $5.5 billion small business package out there. Businesses will be able to deduct $20,000—the tax cut for small companies. It does not stop there. We will continue with a range of measures.
All of us understand the commitment of small business people. We also understand the time it takes to work in the administration of small business. So often these people work endless hours. They have invested all of their own money, mortgaged their home, taken huge risks—often to follow their passion—and have done some pretty solid planning.
They are often the same people who do not sleep at night. If you have a debt and you are employing people, there are some huge challenges when you are a small business operator. As always, I acknowledge and respect the work that these people do right through the whole of Australia, but particularly those who frequently have to survive and work hard to survive. They cut their costs. They do everything they can to stay in business and be such a strong part of our rural and regional communities.
As I said, we are committed to continuing to support small business. Nothing shows that more clearly than our commitment not just to the reduction of red tape but also through the jobs and small business package that we introduced as part of the budget. To think that we have a small business minister now sitting in Treasury, in cabinet—he is a key part of every decision that is made. Small businesses know that we take them seriously and that we respect the efforts they make. We know that they employ nearly half of the Australians who look for work. Often young people get their very first job in a small business. It can be the people towards the maturing age of their commitment and ability to work who work in small businesses as well. On that basis I support the bill before the House.
First I acknowledge those members who have contributed to this debate. The bill is aimed at reducing superannuation compliance costs for businesses, particularly small businesses, by simplifying the superannuation choice regime. This bill delivers on the government's commitment to reduce superannuation compliance costs for small businesses. This bill simplifies when a standard choice form must be provided by an employer to an employee. Under this bill, employers will no longer have to provide a standard choice form to temporary resident workers. The bill also means employers will no longer have to re-offer a choice of fund form when a superannuation fund the employer has been making contributions into merges with another fund. Importantly, we are not removing an employee's right to choose a superannuation fund if they wish to do so. This bill is part of a package of measures which will fulfil the government's commitment to reduce the superannuation compliance costs of small business. I commend this bill to the House.
Mr Husic interjecting—
I am very pleased that the member for Chifley has had a momentary vision of prudence and sense and is supporting this important bill, together with his colleagues.