Chris Bowen (McMahon, Australian Labor Party, Shadow Treasurer) Share this | Hansard source

Here we are in the final sitting fortnight of this year and we are finally debating the government's superannuation legislation, the Superannuation (Objective) Bill 2016 and related bills. I guess it is surprising that we are debating it at all, given that it was the position of the government until budget day that they would never tax superannuation differently.

It is worth a brief recount of how we got to this point. In April 2015, the Labor Party announced a superannuation package to better target tax concessions in superannuation. It was a substantive policy announcement on behalf of the opposition, raising a considerable amount of money and making the superannuation system fairer. Of course, the government responded strongly when we announced that policy, and one person in particular led the fight. He was at the time the Minister for Social Security and, since then, he has been made the Treasurer. He has had a lot to say about superannuation in both portfolios. He said, following our announcement, that the Labor Party would change the superannuation tax arrangements if we were elected to government. He said, for example:

That is why we are so adamant about not having adverse changes to superannuation, that’s why we aren’t going to increase taxes on superannuation …

That is what the Treasurer said. There is a pattern here. When the Treasurer says he is adamant about something, it is a cause for real concern.

He said he was adamant that he would never change taxation rules for superannuation. He said it was a matter of great passion to him and that he was going to introduce 'big and broad and sweeping' personal income tax cuts. Of course, he did not do that, because that was going to be funded by the increase in the GST, and the Prime Minister cut him off on the issue of the increase in the GST. But the quotes go on from the now Treasurer. He said:

Well we do want to encourage everyone Dale to be saving for their retirement and particularly when you are drawing down on that when you are retired we don’t want to tax you like Chris Bowen does.

That is a direct quote from the Treasurer. He then said on 5 May 2015:

It’s the Labor Party who wants to tax superannuation, not the Liberal Party, particularly the incomes of superannuants and I think that’s a fairly stark contrast that’s emerging.

It is interesting that he said that on 5 May 2015, because a year later, in May 2016, he stood at the despatch box and brought down his first—and quite possibly only—budget, and that budget that he introduced contained substantial changes to the taxation treatment of superannuation. These are things that the Treasurer said he would never do. But this budget announcement was far from being a matter for congratulations for the Treasurer—though, at least he came around to the Labor Party's way of thinking; we accept that. The Labor Party led the debate, and he eventually saw the merit in what the Labor Party was putting. But, as he did so, he completely botched the delivery of this superannuation tax package. He got it wrong and it had to be revised and redrafted post-election, because he had announced in the budget a retrospective tax measure. We can have our arguments in this House—and I would argue that you do not expect the Liberal Party to believe in much—but you do expect the Liberal Party to stand against retrospective tax changes. The one thing that you would expect the Liberal Party of Australia to be consistent on is that we should not change tax retrospectively. It is an important principle—and I tell you what, Mr Speaker, the Labor Party believes it too—because if Australians are complying with the law of the land at the time, acting in good faith, they should be able to invest, make their decisions and plan their future knowing that a future government will not come along and fiddle with those laws retrospectively.

There have been a very small number of instances where a retrospective tax change was justified. The only one I can think of was in 1982, when then Treasurer Howard changed the tax laws retrospectively to deal with bottom-of-the-harbour tax evasion. That was justified. But that was one of the very rare instances where you could say that principle could be breached, in that case because of the egregious behaviour of people engaging in tax evasion. It certainly was not justified in this instance.

The Treasurer had a unique response to the concerns raised—in fairness, in his own party room, the Nationals' party room, by us, by superannuants and by the sector—about this retrospective tax change: he said it is not retrospective. He just denied that it was retrospective. There was a dead giveaway in the budget papers, because the 2016 budget said this measure applied from 2007. It was a dead giveaway that it was retrospective. The giveaway was in the budget measure itself. When a budget measure in the 2016 budget applies from 2007 it is retrospective.

Of course, the Treasurer was, in a humiliating backdown, forced to change that post-election. We had suggested that the measure be changed to a cap of half a million dollars prospectively. He did not do that. He took a slightly different approach. He made the cap annual. I have no problem with that in principle. Showing the sort of bipartisan approach we can when the government admits it got it wrong, we said: 'Yes, we think an annual cap prospectively works. We can deal with that.' He then dropped two other measures. He dropped the measure relating to the harmonisation of contribution rules for those aged between 65 and 74, and he delayed, in fairness, another measure relating to catch-up concessional contributions. They are three changes. The Treasurer came out and said he had made just one change to the election package. He said, 'Yes, we changed the package we took to the election, but it was only one small change.' In fact, there were three changes. That is what you get from a Treasurer who has octupled the budget deficit on his watch: you get a Treasurer who is just not up to the task of managing Australia's economy or superannuation system. What we get is this sort of bad policy on the run.

Let me be very clear: This package is better than it was. This package is better than nothing. We are glad the government have finally acknowledged the need for superannuation tax reform. What we will do, in this debate and in the other place, is make sensible suggestions as to how it can be improved. The government lecture us about the AAA rating. They lecture the Australian people, pensioners and students about the need to tighten their belts. They lecture families. Then they introduce these measures, which will cost money, and they introduce them in a way which could be improved. The suggestions we make would add $1.4 billion to the budget bottom line over the next four years and more than $18 billion to the budget bottom line over the next decade.

The Treasurer says that these new measures are vital and necessary, but he has already dropped one. He says they took them to the election, they are going to continue with them and the measures are absolutely vital, but he has already dropped one. If he has dropped one, he can drop more in the interests of budget fairness and budget repair. The Treasurer seems to think that he can breach election promises but he will choose which election promises he breaches and the circumstances in which he breaches them.

Well the fact of the matter is this parliament can say, given the pressure on the budget, 'we have a better way', and that better way goes to keeping the annual cap but making it $75,000 instead of $100,000. That is a better measure. I recognise it is not the biggest change that has ever been suggested in the course of this parliament. It is not a revolutionary change but it slightly better targets the measure. The number of people who would contribute between $75,000 and $100,000 is small and of course it is primarily focused on those who have higher incomes.

We have a situation here where we are saying our other proposals, which were in fact first outlined by the Leader of the Opposition in the Press Club earlier this year, would also improve the budget bottom line. We are glad that the government has adopted Labor's position of targeting the division 293 tax threshold better. The contribution tax was originally at $300,000, but the government has now agreed to bring that down to $250,000. But we again argue in this time of fiscal restraint, in this time when the budget is under pressure, in this time when the government may lose the triple-A rating before Christmas or next year that it would be better to target that at a level of $200,000. Again, I accept that not everybody will be wildly enthusiastic about that idea, but we do need to ensure the priorities of the system and we need to ensure that the tax concessions are properly targeted. We need to do that because we know that the current system sees half of all superannuation benefits flowing to the top 20 per cent of income earners. In fact 40 per cent of the benefits of superannuation tax concessions go to the top 10 per cent of income earners alone.

We will have a discussion later about the objective of superannuation, but I would have thought we could all agree that one of the objectives of superannuation is to lift as many Australians as possible out of the age pension so that they can have a dignified retirement based on their own savings through superannuation. It is better for the budget and better for them. But if you have the situation where 40 per cent of the benefits are going to the top 10 per cent of income earners, that is not achieving that objective. Superannuation was not designed by the Labor Party in the 1980s and 1990s as a high-income estate planning mechanism. It was designed to lift people out of poverty and to give as many Australians as possible a dignified retirement without recourse to the full age pension, taking pressure off the federal budget and giving Australians a chance to share in the wealth creation of this nation.

With all due respect to Australia's top 10 per cent of income earners, it does not matter what the tax concessions are on superannuation. If you are in that bracket no doubt you have made smart decisions and worked hard during your life but you will not darken the door of the Centrelink office regardless of what the tax concessions are in superannuation. You do not need those tax concessions to ensure that you do not fall back on the age pension in retirement. So we do need to better target those tax concessions.

Also we do not propose to support proceeding with the other new measures that the government is implementing via this legislation—the tax deductibility for personal superannuation contributions and the catch up concessional contributions. Again, this is not a matter in which we say we have an in-principle objection, an ideological objection or an objection which would withstand all time but we say, if we are having this discussion about how to improve the budget, these two new measures combined come up to over $12 billion over the next decade in new tax concessions.

So we are taking the responsible approach and saying to the government, in effect: 'We will release you from your commitments; we will not criticise you for dropping these measures because the budget is under pressure since the election.' The triple-A rating has been put on negative watch. Since the election, the pressure on the budget has grown, and so we are, in effect, saying to the government: 'We will release you from the obligation. We will not hold you to it. In fact we will support you dropping those measures as a measure of bipartisan support for budget repair.' You would think that the government, with the budget under such pressure, would accept that offer. It appears they will not. They have said they will not. That is a matter for them, but we will pursue that through the appropriate mechanisms of the parliament. Whether they are adopted or not by the government or by the other place, I cannot predict. But they represent Labor policy. If they are not adopted, we will take them to the next election and they will be reflected in our commitments at the next election whenever that may be.

I want to make it clear that we will move the appropriate amendments, and I will move a second reading amendment at the conclusion of my remarks today—and I hope the government will support it, as they have done on previous occasions. They have supported second reading amendments which are sensible and well crafted. I see no reason why the government would not support this one. It is a very good one. In the Senate we will also pursue amendments.

If the government refuse, at the end of the day, to accept those amendments, we will not give the government an excuse to walk away from this legislation. I will not give this Treasurer an excuse to walk away from what he has been dragged kicking and screaming to do. We will not let the perfect be the enemy of the good, and we will facilitate the passage of the legislation. I hope the Treasurer goes to the ratings agencies and says, 'Look, we can pass legislation which improves the budget bottom line. We can do so with the opposition's support.' And he is free to say, 'Look, the opposition even moved amendments which would have improved it by $1.4 billion but we chose not to accept them.' He is welcome to do that too.

And I will point out, in my interactions with the ratings agencies and in the public discussion about budget repair, that we have a superior position, which would have improved the budget more if the government had adopted it, and it will reflect our policy at the next election. But we will not seek to frustrate the passage of the legislation, because good is better than perfect. While the government, in their own stubborn fashion, are refusing to accept Labor's sensible suggestions, we will not allow the government to use that as an excuse for them to walk away.

I also want to flag, given that this is a cognate debate, the matter of the superannuation objective. The superannuation objective which the government is seeking to legislate arises out of the Murray review. The Labor Party responded positively to the recommendation in the Murray review that superannuation should have an agreed, legislated objective. I have said publicly that it is an idea arresting in its simplicity. Many people would think that we already had one, but we do not. Superannuation means different things to different people, in terms of what it is designed to achieve.

I sometimes joke that in 12 years in this House, with about six years in the ministry and five years in the cabinet, I have never heard a public policy problem which has not had one of two solutions suggested for it: either teach it in the curriculum or force superannuation funds to invest in it. That answers all problems. The Minister for Infrastructure and Transport knows that that answers all problems—force superannuation funds to invest in infrastructure. But the thing is: that would not meet the objective of superannuation. The objective of superannuation should be a dignified retirement for as many Australians as possible. Whilst many superannuation funds do invest in infrastructure—and it is a very good thing that they do, and, if they can get good returns, that should be welcomed—it is not what the system is designed for.

So we should have a bipartisan agreed objective. I am sorry to say that, at the moment, we do not. In fairness, I give credit to the government and I give credit to the Minister for Revenue and Financial Services, in particular, who reached out to the Labor Party before the last election, before the last budget, and asked for discussions about reaching an objective for superannuation—and we had those discussions. Without going into the detail of those discussions, those discussions were going fairly well. I think it was well within our wit to find an agreed objective for superannuation, in a bipartisan fashion. But then what happened? I am not critical of the minister for revenue in this instance, because she was trying to reach agreement with the Labor Party—we needed more time to do so, but we were getting close. Then, lo and behold, the Treasurer on budget night got up and announced that he would legislate an objective for superannuation.

The objective that the government announced is not bipartisan and has not been agreed with us and will not meet with our support. If the government wants to continue those discussions which the minister and I had before the election, I am very open to that idea. I think we could reach a bipartisan objective for superannuation. That would be better. But we are not simply going to sign up to an objective which the government decides and which we think could be improved and which many in the sector think could be improved. If you look at the comments on the objective by various groups, ranging from the Institute of Public Affairs to industry funds, they all have complaints about the government's proposed objective. We do not think it is fit for purpose, so we are not just going to blindly vote for something which has not been the subject of proper consultation and discussion with us and which could be done so much better.

This is not time critical. I have accepted, in terms of passing the government's legislation, that it would be better done more quickly, to provide the certainty for the sector and for superannuants and to allow people to make the necessary plans for the changes. But that does not apply to the objective. The objective is not time critical. The objective could be handled through discussions and could be an agreed objective going forward. It is important that it be an agreed objective. Murray recommended that it had broad political agreement, for good reason. Governments change from time to time. The government may change at the next election. And what we do not want is a situation where a new government comes in and fiddles with the objective because they did not agree with it when it came in. It would be better if we had one agreed objective. Agree on it now. Get it right the first time. And then, if the Labor Party comes to office at the next election, we will not have to change it because we agreed to it now, and then the Liberals will not have to change it when they eventually retake office 20 or 30 years after that, because they will have agreed to it now.

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