Steve Irons (Swan, Liberal Party) Share this | Hansard source

I would like to congratulate the member for Wakefield on his speech and for recognising the member for Fadden. He has probably given you an early Christmas present! I rise today to support the Temporary Residents’ Superannuation Legislation Amendment Bill 2008 and the Superannuation (Departing Australia Superannuation Payments Tax) Amendment Bill 2008. Everyone in this House understands the importance of superannuation, particularly those who arrived pre 2004 and, even more importantly, those like me who arrived post 2004.

The Temporary Residents’ Superannuation Bill amends the Superannuation (Unclaimed Money and Lost Members) Act 1999, the Taxation Administration Act 1953 and the Income Tax Assessment Act 1997. The amendments in the Superannuation (Departing Australia Superannuation Payments Tax) Bill are related to the proposed amendments to the Superannuation (Unclaimed Money and Lost Members) Act 1999 through the Temporary Residents’ Superannuation Legislation Amendment Bill.

It is first important to consider the context in which these bills are being implemented. The proposed laws are based on the Howard government’s 2007-08 mid-year economic outlook. Every year Australia grants immigration to many people who want to come here to work. In the last financial year, 239,152 temporary visas with work rights were granted and over 87,300 business long-stay 457 visas were issued.

In WA the number of successful applications for business long-stay 457 visas by primary applicants increased by 70 per cent between 2007-08 and 2008-09. I am consistently reminded by organisations in my electorate of the difficulties associated with the labour shortage in our country. Small businesses all across Swan are struggling to find people to work for them. This has led to inflationary wage increases and, ultimately, higher interest rates for the Western Australian people.

It is not just small businesses that are suffering. I recently met with Mr Graham Francis, the CEO of the SwanCare Group, part of Australia’s aged-care industry. SwanCare is a not-for-profit organisation that provides retirement accommodation for seniors, often at a subsidised rate. The group operates Bentley Park retirement village in my electorate of Swan, which is home to approximately 1,100 residents. Mr Francis explained to me the significant impact the labour shortage is having on the aged-care industry. Western Australians are ageing: in WA in 2007 people aged 65 years and over made up 12 per cent of Western Australia’s population, and this is projected to increase to about 22 per cent in 2056. The demand on the services SwanCare provides is therefore steadily increasing. At the same time, SwanCare is finding it increasingly difficult to attract and retain workers in the aged-care sector. One the reasons for this is their inability to pay competitive wages on account of the shortfall between their rising costs—partially attributable to the inflationary pressures I mentioned before—and increases in their index-linked government funding. However, an equally important aspect of this is the labour shortage.

Immigration inquiries represent by far the greatest number of inquiries that my office receives. We do our best to help all the people who come to our office in East Victoria Park. From Chinese welders to UK dermatologists, we see in our office the clear importance of migrant workers to the local community in Swan. Therefore, from the outset, it is important that this bill recognises the importance of workers coming to Australia and protects these people. I am pleased to see that this bill represents the best interests of these people and the community.

Many of these workers return to their countries of origin after their time in Australia having earned significant amounts of superannuation in accordance with Australian law. Upon leaving Australia, these people are eligible to apply for a proportion of the money in their superannuation account. This is called the departing Australia superannuation payment, or DASP, and comprises the value of superannuation minus tax, which is 30 per cent for the taxed element and 40 per cent for the untaxed element. Under the provisions of the current law, the superannuation of a departed temporary visa holder who does not take a DASP upon departure remains in the fund until it is claimed or becomes payable to the Commissioner of Taxation as unclaimed money—for example, if the departed visa holder has reached the age of 65 but no contact or contributions have been received. The departed temporary visa holder can later claim the amount back from the tax commissioner.

It is worth mentioning at this juncture that generous superannuation is one of the many incentives for people to come and work in Australia. Whilst many people take advantage of this generous policy, countless people fail to claim their superannuation. Superannuation funds are required to report ‘lost’ details to the ATO and these details are recorded on the Lost Members Register to assist individuals in locating their accounts. According to the Australian Taxation Office’s 2006-07 annual report, there are over six million ‘lost’ superannuation accounts on the Lost Members Register maintained by the ATO, with an aggregate value of an astonishing $12 billion.

It was in this context that the Howard government became concerned with the growing amount of superannuation identified as ‘lost’ over the last decade and concerned with the operational costs incurred by the ATO and the superannuation funds managing these accounts. It was in this context that the Howard government initiated the policy which we are debating today. Given this, I want to turn my attention to the key elements of the Superannuation (Departing Australia Superannuation Payments Tax) Amendment Bill 2008. I will outline why I support these key elements but also suggest some concerns with the bill which I ask the government to consider when progressing with the legislation.

It is important to note that the bill will operate retrospectively with regard to the ‘lost’ funds previously mentioned. As the member for Aston mentioned in his speech, these bills have two primary functions. The first function of this bill is to ensure the transfer of unclaimed superannuation funds to the ATO. The proposed legislation will mean that the amount of superannuation earned by a temporary resident will be deemed unclaimed six months after the person has left Australia. At this point the superannuation payment will be transferred to the ATO. The payment will comprise the starting amount of the account minus the payments already made to the former temporary resident. This will of course require effective cooperation between the Department of Immigration and Citizenship, and the ATO.

The second function of the bill relates to the retrieval of funds from the ATO. When the six months have elapsed and the superannuation funds have been paid to the ATO, the temporary resident will still be able to access the fund. There will be no time limit imposed. All payments at whatever stage of the process will be paid at a new tax rate; however, this will be in accordance with the Superannuation (Departing Australia Superannuation Payments Tax) Act component of the bill. Items 4 and 5 amend section 5 of the act to increase tax amounts for DASPs to 35 per cent for the element taxed in the fund of the taxable component, currently 30 per cent, and 45 per cent for the element untaxed in the fund of the taxable component, currently 45 per cent. The rationale for this increase in the tax rate is the first benefit of this bill I would like to discuss.

The increase in the tax rate ensures the recovery of some of the superannuation tax concessions provided to departed temporary visa residents and fits in with the general ethos of the bill of ensuring that superannuation tax concessions are well targeted at people who will retire in Australia and not those who have departed Australia. As I suggested earlier, the Australian superannuation system is an advantage to workers coming to Australia that needs to be retained if we want to solve our labour crisis. However, it is right that those temporary workers that choose to leave Australia pay a degree of tax. The small tax rise associated with these bills will provide an additional incentive for temporary workers to continue to contribute to the nation and ease the labour shortage. I agree with the general principal that our superannuation system rewards those who choose to make Australia their permanent home.

The second benefit of this legislation is financial. These bills are predicted to have a positive impact on government revenue. Although there is likely to be no net change in the 2007-08 financial year, in 2008-09 the government is expected to gain an additional $251 million in revenue. This will climb to $378 million in 2009-10. Given this, it is important that this money is spent wisely. We need to know from the government exactly how this extra revenue is going to be spent. I suggest that it be spent on addressing some of the concerns—and qualifications for my support—I am about to outline. Firstly, we need to ensure that people departing Australia are properly informed about the effect of this policy. It is important, for example, that we have the information available to distribute to the many people who approach my electorate office. In particular we need to take note of the concern of the Association of Superannuation Funds of Australia that temporary residents who have already made their superannuation arrangements based on the current laws may be uncertain as to whether their superannuation accounts will remain lodged with their superannuation provider indefinitely. This requires clarification and ultimately money to be spent on an information campaign. Secondly, I believe the money should be directed towards assisting organisations such as SwanCare, led by its CEO, Mr Graham Francis, to employ and retain skilled workers to ensure that vital industries, such as the aged-care industry, do not collapse.

The final benefit of this bill I would like to discuss is administrative. The bill is likely to reduce the operational costs of both superannuation providers and the ATO, which is a welcome reduction of red tape. I restate, though, that there needs to be effective cooperation between all parties. This includes the DIAC, the ATO and the superannuation funds. I would like to urge the government to take into account a further concern of the Association of Superannuation Funds of Australia—that is, given the legislation will also operate retrospectively, funds with a large number of former residents would be forced to liquidate their assets quickly. This may lead to an adverse impact on the value of the remaining member’s accounts. The government must ensure that people’s superannuation is protected against this eventuality with a phased and sensible introduction of the legislation.

I want to spend the last few minutes of this speech considering the importance of a strong superannuation system given the current financial crisis. I want to focus in particular on self-funded retirees, of which there are a significant number within my electorate. Self-funded retirees take responsibility for their own finances. The financial crisis has therefore placed a significant burden of worry on these people. The predicted ramifications of the financial crisis are changing daily, which makes it very difficult to make specific points. However, at this point in time it is important that self-funded retirees receive good advice from the government of the day. The coalition government worked hard to provide incentives for Australians to boost their retirement savings, introducing one of the biggest reforms to superannuation ever. The Howard government simplified superannuation, making superannuation benefits tax free for most Australians over 60 and allowing the self-employed to claim a 100 per cent deduction for all contributions.

The superannuation co-contribution scheme, whereby superannuation contributions are matched by the government, was introduced in July 2003 as a means of assisting lower income workers to save for their retirement. In the first three years of this scheme over 2.9 million co-contribution payments worth $2.2 billion have been paid to the superannuation funds of lower income Australians. The coalition also introduced a tax rebate to encourage individuals to make superannuation contributions on behalf of low-income spouses; gave employees the right to choose which super fund their employer pays into, injecting competition into the marketplace; and introduced a new trustee licensing regime to better safeguard members’ benefits, while strengthening preservation arrangements to help people accumulate larger superannuation benefits for retirement. I hope the Rudd government will continue this positive superannuation legacy, and in particular support self-funded retirees through this difficult time.

In conclusion, I support the two bills before the House today. They ensure that the benefits of superannuation are enjoyed by those that choose to retire in Australia, they generate revenue and they save on operational costs. However, the government must ensure that this extra revenue is spent wisely, on providing information to the temporary workers affected by this legislation, including many people in my electorate, and also helping to solve the labour crisis. I urge the government through this financial crisis to appropriately protect self-funded retirees and indeed all holders of superannuation in Australia. I commend these bills to the House.

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