Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Assistant Minister for Treasury) Share this | Hansard source

The Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018 aims to protect members' superannuation savings from erosion by fees and charges. Of course, this is an objective that Labor is sympathetic to. As the shadow Treasurer said in his remarks to the Press Club in May, 'We also think insurance, opt-in insurance, is a legitimate issue to consider, particularly for young people with low superannuation balances.' Account holders who generally have lower superannuation balances are younger members; low-income earners—predominantly women, unfortunately—and seasonal workers.

Often people with low balances are disengaged from superannuation and do not actively monitor or organise their accounts to minimise erosion of savings. Many people also have multiple superannuation accounts, leading to them paying multiple fees, charges and insurance premiums. At 30 June 2017, over 14.8 million Australians had a superannuation account—so approximately 15 million Australians had a superannuation account—and approximately 40 per cent of those people had more than one superannuation account. Of course, when you have more than one superannuation account often you're paying multiple sets of fees and have two insurance policies covering exactly the same thing—and, therefore, you are paying premiums for both those insurance policies. It's inefficient and, ultimately, it's whittling away investment returns for those members.

This bill aims to protect members' superannuation savings from erosion by limiting fees so that low-balance savings can grow and are protected from disproportionately high fees. It also bans exit fees. This will remove a barrier to account consolidation. The bill helps to ensure that arrangements for insurance in superannuation are appropriate so that members are not paying for insurance cover that they do not know about or that is inadequate in terms of the coverage and are not paying premiums that inappropriately erode their retirement savings. Finally, this bill strengthens the ATO's role in reuniting small inactive balances to reduce the costs to members and consolidate the accounts of members that have accrued multiple superannuation accounts.

More specifically, the bill prevents trustees of superannuation funds from charging certain fees that exceed three per cent of the balance of a MySuper or choice product annually where the balance of the account is below $6,000. It also prevents trustees from providing opt-out insurance to new members aged under 25 years, members with balances below $6,000 and members with inactive MySuper or choice accounts, unless the member has directed otherwise. This is something that some of the super funds have been looking at for some time now. AustralianSuper, the largest industry superannuation fund in the country, actually decided to implement this policy so that members aged under 25 years need to opt in to insurance within their superannuation fund. If they've got balances below a certain threshold, then those provisions kick in as well.

The bill will require the transfer of all superannuation savings with balances below $6,000 to the tax commissioner, if an account related to a MySuper or Choice product has been inactive for a continuous period of 13 months or more. The proposed start date for these changes is 1 July 2019, and the explanatory material reports that the changes are expected to raise savings of $1.75 billion in underlying cash balance terms over the forward estimates and $850 million in fiscal balance terms. The changes in this bill are significant and will impact people's lives and retirement incomes.

While Labor is certainly sympathetic to the objective, we wish to take our time in ensuring that there are no unintended consequences from this bill and to deeply analyse this legislation. In that respect, we are proposing that a Senate inquiry look at the provisions of this bill and their consequences and hear the views of the Australian people regarding them. Some concerns have been raised by employee representatives, by trade unions and by the operators and administrators of particular funds about the potential unintended consequences of removing insurance for people under the age of 25, particularly where they work in dangerous industries, like the building industry or the mining industry. We want to make sure that we're not unintentionally reducing that coverage. It is pretty important for people, particularly once you start raising a family, once you get married and have kids, that you do have an appropriate level of insurance. We all know that actuarial studies and other surveys have indicated that Australians are hopelessly uninsured when it comes to general insurance and, indeed, life insurance. We want to make sure that there are no unintended consequences of this and that it doesn't result in negative consequences rather than what was intended. So, as I mentioned, we will be referring it to a Senate inquiry.

When it comes to superannuation, this government doesn't have a really good record, to be honest. Of course, we remember the government's disastrous 2016 superannuation changes. After Labor led the way from opposition in 2015 and proposed policies to reform superannuation tax concessions, the government spent much of 2015 and 2016 arguing against the sensible changes to superannuation concessions that Labor had put forward. Then, in the 2016-17 budget, the government announced that it planned changes to superannuation, and they were done in a hurry and without consultation. The government's proposed $500,000 lifetime cap on non-concessional contributions triggered widespread concern that the government was making retrospective changes. Yet, the government ploughed on and, in its hurry to get to an early election, the then Prime Minister, when asked if he could foresee any circumstances in which the policy announced in the budget would change following an election, said, 'It's absolutely ironclad.' That was the Prime Minister's quote: 'It's absolutely ironclad.' They said they wouldn't be changing it. But after one of the longest elections in recent times, the divisions within the government became clear. We saw several members of the coalition raise concerns about retrospectivity, which saw the spectacle of some members of parliament threatening to cross the floor and oppose the government's budget proposals if changes weren't delivered upon. While the government eventually, reluctantly scrapped the flawed changes, it was only after it had undermined the confidence in the retirement system that sparked a civil war within the Liberal Party. Given the government's record, we will take our time to look through the proposed changes in this bill carefully.

Not only have the government made a hash out of their tax changes relating to superannuation but they have consistently shown a poor record when it comes to supporting the right changes around superannuation in this country. They voted against the introduction of universal superannuation when it was proposed by the then Treasurer, Paul Keating, back in the 1990s. They voted against every single increase in the minimum rate of the superannuation guarantee, because we all know that they don't believe in the notion of compulsory superannuation. They have never gotten over the fact that industry funds do a better job at managing people's finances than the retail funds and many of the self-managed funds. That's because there are union representatives working with employers on those superannuation trustee boards. The Liberals don't like that philosophy. They have never gotten over the fact that the industry funds do a better job of managing people's finances, in terms of lower fees and better investment performance when it comes to superannuation returns.

The Liberals delayed the scheduled increase to the superannuation guarantee from 9.5 per cent to 12.5 per cent. If we're going to ensure that Australians have an adequate income to retire on, and avoid going onto the pension in later years, particularly those workers who have breaks from the workforce—most notably women, unfortunately—if we're going to ensure that employees and workers retire with an adequate investment pool, through their superannuation, and can avoid going onto the pension, then we need to increase the compulsory rate of superannuation savings in this country. There is a litany of actuarial studies and other surveys indicating that on current trajectories most people won't make it, particularly those on low incomes—that they won't be able to ensure they have an adequate retirement savings pool, after they finish in the workplace, and thus avoid going onto the pension.

So this government's opposition to further increases in the compulsory superannuation rate is really damning for the budget, as far as increases in outlays associated with the pension are concerned. It therefore reduces the potential for us to run surpluses in the future and to fund programs that will be important, particularly aged care and other programs associated with an ageing population, like Medicare and properly funded hospitals and aged-care beds. So we need to be looking at increasing the compulsory rate of superannuation in this country, but this government has delayed it. On every occasion on which they've had the opportunity to vote for these changes, they have voted against them. They abolished the low-income superannuation scheme, and then they reintroduced it, but only under pressure from the Labor Party and from some within the industry. They reintroduced it one budget later. I think they got rid of it in the 2014 budget, and then in the 2015-16 budget they reintroduced it and renamed it the LISTO.

They undermined our superannuation system with their First Home Super Saver Scheme, which will do nothing to address housing affordability. More recently, the government has proposed a superannuation amnesty that would give a penalty holiday to employers who have not paid superannuation to their employees for as much as 25 years. The notion that under this government people who have broken the law for 25 years will be able to get away with it is completely ridiculous. Imagine if you rocked up to the tax office one day and said: 'You know what? I haven't paid income tax for 25 years. I haven't paid company tax for 25 years. I want you to give me an amnesty.' That is exactly what this government is doing with superannuation. Employers who haven't paid superannuation to their employees, which they are required to do under legislation, and for which there are quite harsh penalties, will be given an amnesty by the government. Labor, of course, has expressed its opposition to this proposal. Superannuation theft is exactly the same as wage theft. Why should dodgy employers get away with stealing hard-earned money from their employees?

In contrast, Labor has a very different philosophy when it comes to superannuation. We all know that it was the Labor Party that built the compulsory superannuation system. It has now developed into the third-largest savings investment pool in the world and it is one of the reasons that our economy had a buffer to protect Australian workers from the ravages of the global financial crisis in the wake of 2008. It was Labor that introduced universal compulsory superannuation. We proposed and legislated all of the increases to the rate of the superannuation guarantee. They were all opposed by the coalition.

Labor introduced the low-income superannuation contribution scheme, under which low-income earners would effectively not pay tax on their superannuation guarantee contributions. We introduced MySuper, the new, simple and cost-effective default superannuation product. Labor made it easier for small businesses to pay their super through the introduction of the Small Business Superannuation Clearing House in 2010. Labor led the way in reforming the payments system. The introduction of SuperStream in 2012 fundamentally improved the superannuation system experience for fund members, employers and funds.

Labor is the party of superannuation, and we'll be checking the bill, as I mentioned earlier, for unintended consequences and to consider whether there are better ways of achieving this objective. We'll take the time to consult with stakeholders and to explore concerns that have been raised, including: that the removal of default insurance could lead to members with high-risk occupations, and others with families and mortgages, becoming uninsured or underinsured; that the changes could lead to an increase in premiums; and that the transfer to the ATO of accounts which have been inactive for 13 months could lead to lower returns for members. We also need to ensure that the changes to the fees will not be able to be circumvented through an increase in other charges.

In conclusion, the objective of trying to protect the balances of people with low balances is one Labor is sympathetic to, but we'll take our time to work through these measures in this bill and we'll reserve our position on it, including on whether any amendments are required, until after the Senate Economics Committee inquiry into the bill has reported.

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