Wayne Swan (Lilley, Australian Labor Party, Shadow Treasurer) Share this | Link to this | Hansard source

The House is considering a package of bills to implement changes to Australia’s superannuation system. Labor supports the Tax Laws Amendment (Simplified Superannuation) Bill 2006 and cognate bills, but I do wish to move a second reading amendment. I move:

That all words after “That” be omitted with a view to substituting the following words: “whilst not declining to give the bill a second reading, the House notes that Labor governments laid the foundation for Australia’s modern superannuation system by introducing compulsory superannuation contributions; and further, the House—

(1)

in supporting the bills—notes the measures will:

(a)

improve the retirement incomes of many Australians;

(b)

enhance simplicity of the compulsory superannuation system; and

(c)

give certainty and stability in the critical public policy area of savings for retirement;

(2)

notwithstanding support for the bills as a whole—notes the unanimous concern by the Senate Economics Legislative Committee in respect of:

(a)

the tax increase from 15% to 46.5% of contributions where an employer fails to provide an employee or member tax file number;

(b)

the treatment of Defence Force disability pensions;

(c)

the disparity in income tax treatment of non-superannuation income for members of ‘untaxed’ funds aged 60 and above compared to members of other funds; and

(d)

the need for a subsequent amending bill before 30 June 2007 to address any issues that require further consultation;

(3)

notes that both the Government’s own projections of new benefit lump sum and pension outcomes indicate a nil or very small improvement in retirement income for those with small retirement savings; and

(4)

notes the need to develop and implement further policy to improve the retirement savings of middle and low income Australians”.

Labor support these bills. We support them for a number of reasons. First, Labor strongly support superannuation. We have championed superannuation for two decades. The reforms of the Labor government in the eighties and nineties were some of the most profound economic reforms in Australian history. Compulsory superannuation is still contributing to the economic health of our nation. That impact is compounding, just like the retirement balances of almost all employees.

In addition—and this has not been remarked upon enough in the public debate about superannuation—Labor’s superannuation guarantee has been the greatest equaliser of the distribution of wealth that this country has seen since the introduction of decent industrial relations 100 years ago. Quite literally, if we had not made superannuation comprehensive, more than half of the workforce would have no superannuation today. It would have remained the preserve of executives and the public sector rather than being the great national system we now enjoy.

Second, we support this package because it introduces measures which will help to simplify a complex system. This government cannot resist unwieldy, complex regulation. We have seen it in taxation, we have seen it in financial services reform and we have seen it in superannuation. Red tape and enormous compliance costs are the hallmarks of the Howard government. Anything that reduces the load is welcome.

Third, in this area of economic policy, we must plan for the very long term. With bipartisan support these reforms will maintain a stable and certain environment for savings and investment and retirement income planning. Fourth, Australia now boasts one of the strongest funds management industries in the world. We now have the fourth largest volume of savings under management and we are growing very strongly. We are a world leader in many aspects of financial services because of our long-term strategy in superannuation. These are high value added industries paying high salaries that are enmeshing Australia with the world’s leading economies. This will further underpin our prosperity this century.

Finally, of course, these changes will improve the retirement incomes of many Australians. However, despite the changes in this package, Labor believes that fundamental superannuation reform challenges remain. The purpose of the Australian superannuation system is to allow Australians to provide a comfortable standard of living for themselves in retirement. A strong superannuation savings system has several economic consequences. First, by encouraging people to save for their own retirement, an effective superannuation system will increase retirement incomes, thereby improving living standards in retirement. Second, these reforms will take some of the pressure of the ageing of our population off future budgets. As the Australian population ages, a super system that provides adequate incomes in retirement will ease financial pressure and ensure that we can continue to deliver budget surpluses and lock in our economic prosperity. This is consistent with Labor’s budget rules, the first of which is that Labor will keep the budget in surplus on average over the course of the economic cycle.

A large and growing pool of superannuation savings has supported the growth of Australian equity markets, boosting returns for investors through both superannuation and other investment vehicles. This in turn has increased the attractiveness of superannuation as an investment. The total pool of superannuation funds under management is large and it is growing. APRA reported in September last year that total funds under management reached $945.6 billion. On one projection, which assumes average annual earnings of eight per cent, that tally will reach $1.8 trillion by 2011 and then $3.3 trillion by 2017.

There are important economic consequences which flow from this enormous accumulation of savings. In the long run, as Australian superannuation assets continue to grow, we will increasingly export our capital, with Australian superannuation funds investing directly in overseas assets and through foreign debt and equity markets. In some ways it is disappointing that the funds of Australian workers are going offshore for want of Australian projects to invest in. However, it also demonstrates Australia’s financial maturity and economic power as we invest globally to secure future prosperity.

The fact that superannuation funds today hold assets equivalent to 95 per cent of GDP proves that Labor is the real party of wealth creation. Only Labor had the foresight to introduce a superannuation system that would underpin the retirement incomes of Australian families and provide a valued source of capital for Australian businesses. Along with the microeconomic reforms of the eighties and nineties, superannuation was one of the reforms that turbocharged the Australian economy and led to the prosperity we enjoy today. More than anything else, we must recapture that reforming zeal and embrace a new productivity agenda.

Labor introduced compulsory superannuation in exchange for wage restraint as part of its historic accord with the Australian workers. In the process, Labor built superannuation into the remuneration package of every Australian employee. That is a wealth-creating legacy that Labor is very proud of. At a time when households face the burden of the highest ratio of interest payments to household income in Australia’s history, the contribution of superannuation savings to Australian households’ balance sheets is very welcome. As I said previously, it is a great vehicle for fairness, for spreading the prosperity of economic reform through the whole community rather than to just a select few.

Australia’s retirement income system is based on three pillars—the government age pension, indexed to male total average weekly earnings and means tested, the compulsory nine per cent superannuation guarantee and additional voluntary superannuation contributions underwritten by a range of incentives. These pillars were in the main introduced by Labor governments. These are widely recognised internationally as best practice retirement incomes policy—a fair, affordable system for ensuring dignity in retirement and buttressing our economic performance as well.

I watch with amusement as the Treasurer, desperate to find an economic reform legacy that is not merely a new tax, claims authorship of the superannuation system. The inescapable fact is that he opposed this system. He has called these changes ‘the biggest reform to superannuation that Australia has ever seen’. That comment has no credibility with the industry or with commentators. It is just as he claims credit for the independence of the Reserve Bank. In fact, both Australia’s system of compulsory superannuation and the independence of the Reserve Bank were initiatives of Labor governments, as any economist will attest.

The coalition’s record on superannuation is poor. Those opposite maintained that pension means testing, the initial three per cent compulsory superannuation of 1987 and the nine per cent superannuation guarantee bills of 1992 would be disastrous for both individuals and the economy. That is their record. To their eternal shame they did everything they could to defeat the nine per cent superannuation guarantee, including voting against it in both houses of parliament. So let us get the record on that straight. Indeed, both the Treasurer and the Prime Minister were among the chief critics of Labor’s reforms.

The Treasurer has displayed a very erratic approach to superannuation policy. He broke the then Liberal opposition’s 1995 pledge to maintain Labor’s three per cent matching government co-contribution to take contributions to 15 per cent, introducing the failed savings rebate, which had only operated for six weeks when he announced its abolition. The Treasurer also introduced a so-called superannuation contributions surcharge, which was a tax on certain superannuation contributions, usually employer and personal deductible contributions, of up to 15 per cent—another broken election promise. Then the Treasurer deemed superannuation holdings as an asset for social security purposes prior to the age of 65. These are just a few examples of the Treasurer’s and his government’s lack of long-term vision for such a fundamental part of our economic infrastructure. Despite all of that, Labor has had to put up with the Assistant Treasurer’s bizarre fortnightly taunts designed to goad Labor into a rushed response to these complex changes.

I am keen to draw to the House’s attention the fact that debate on these bills is hindered by a lack of information. As is increasingly common now, the Treasurer failed to provide detailed costings of these policies or estimates of the numbers of people affected by them, despite our repeated requests. Indeed, the scant costing was upgraded by almost half a billion dollars when some finetuning was announced after the original announcement. I am informed that the government is resisting a freedom of information application for the long-term forecasts of superannuation tax revenue. If the Treasurer is so keen to prove his economic management credentials, there is no reason for him to refuse access to that information.

I want to turn to some of the measures in the bill. The primary change in this package is that from 1 July 2007 superannuation benefits paid from a tax fund either as a lump sum or as an income stream such as a pension will be tax free for people aged 60 and over. Benefits paid from an untaxed scheme, mainly affecting public servants, will still be taxed, although at a lower rate than they are now for people aged 60 and over. Reasonable benefit limits, known as RBLs, will be abolished. Individuals will have greater flexibility as to how and when to draw down their superannuation in retirement. Under the current rules, funds are forced to pay out the benefits of members who have reached age 65 and who do not meet a work test. Under these changes, superannuation funds are no longer forced to pay benefits.

The concessional tax treatment of superannuation contributions and earnings will remain. Age based restrictions limiting tax deductible—that is, concessional—superannuation contributions will be replaced with a new set of rules. The self-employed will be able to claim a full deduction for their superannuation contributions as well as being eligible for the government co-contribution for their after-tax contributions. The tax exemption for invalidity payments will also be extended to the self-employed. The ability to make deductible superannuation contributions will be extended to age 75. It will be easier for people to find and transfer their superannuation between funds.

To further increase the incentives to save for retirement, from 20 September 2007 the pension assets test taper rate will be halved to $1.50 per fortnight for every $1,000 of assets above the assets test free area—a welcome initiative. The superannuation preservation age will not change. The preservation age is already legislated to increase from 55 to 60 between the years 2015 and 2025. People will still be able to access superannuation benefits before the age of 60, although they will not be taxed on their benefits under new simplified rules.

I turn now to some of the impacts of this package. The total cost of the package is $7.2 billion over the next four financial years. The beneficiaries of the tax-free treatment will be those Australians who have, or will have, $136,000 indexed, or more, in super. For Australians with substantial retirement savings, this package will provide welcome additional retirement income. At present, neither exit tax nor, in most cases, income tax apply to individuals below the level of super savings. But research from the National Centre for Social and Economic Modelling showed that, in 2004, for baby boomers aged 45 to 60, the average man had $87,000 and the average woman had just $35,000 in super savings, with median retirement savings of just $30,700 and $8,000 respectively.

This means that some baby boomer battlers retiring now will receive little or no tax relief. They will need more than $136,000 in retirement savings to benefit from the tax-free treatment this package provides. The government’s discussion paper released with the budget last year confirms this point, showing that there is no tax benefit for those retiring now aged 65 with $100,000 in super, and a tax saving of just $2,272 for those with $150,000. Of course, those retiring in the future will receive a substantial benefit from these measures.

The measures in this package, which both expand and rationalise incentives for small business by applying the same rules and including them in the voluntary co-contribution scheme, are welcome. These changes will assist people in this vital and growing sector of our economy. It should be noted that the loss to revenue from the new tax treatment and co-contribution will amount to $4.2 billion of the estimated $7.2 billion cost of the package over four years. That means the government is putting just over $1 billion extra each year into superannuation. Combined with a further $1 billion each year from existing voluntary co-contributions, a total injection of some $2 billion a year extra into super has been provided by the government.

This incentive approach is likely to see ongoing additional voluntary contributions of $2 billion to $3 billion a year. This is important for setting up Australians with decent retirement incomes. But the new flows to super are put starkly in the shade when they are compared to Labor’s compulsory nine per cent superannuation guarantee, which delivers some $65 billion every year. Credit for that achievement should be given to the far-sighted Hawke and Keating Labor governments, which introduced our modern Australian superannuation system. It is because of the strong foundation they established that our retirement income system is recognised by the World Bank as global best practice.

My colleague in the other chamber Senator Nick Sherry has noted one area of particular concern in these changes: namely, the new higher tax—at a rate of 46.5 per cent rather than 15 per cent—which will apply to contributions where an employer has failed to provide their employee’s tax file number. The Senate Economics Committee looked carefully at this issue in their hearings on these bills. The exemption rate below which this new tax will not apply is $1,000 a year, representing an annual income of just $10,000. It should be set higher; otherwise, hundreds of thousands of battlers will face a higher tax rate. That was the unanimous recommendation of the committee. The committee also made further unanimous recommendations in areas such as defence force disability pensions and income tax treatment of non-super income for public servants over the age of 60. I note the committee’s recommendations.

I referred earlier to fundamental challenges that still face our superannuation system. Labor has announced a range of policies to improve the super system. They include a combined pension superannuation forecast in a simple standard format. Under this system, 10 million Australians will, for the first time, receive critical information that will enable them to plan their savings well ahead. For example, a 25-year-old will get an estimate of likely retirement income at age 60 and 65. It is based on the example of similar systems in Sweden and the United Kingdom which show a higher level of contributions, particularly among young people.

Labor also proposes a clearing house that employers may use to solve the new compliance burden which arose with the government’s choice-of-fund regime. A clearing house will allow the employer to pay all contributions to a central distribution point, with employees registering their choice of super fund with that central point only once. This removes the up to 36 decision-making steps and much of the bother of repeated form-filling and processing imposed by the government’s ‘choice’ regime.

Labor will allow employer processing of additional contributions where such contributions are authorised by an employee. Labor will ensure the nine per cent superannuation guarantee contribution is based on pre-salary-sacrifice salary and wages.

Labor will implement automatic consolidation of inactive lost accounts, which now number 5.7 million and hold almost $10 billion. Lost super has skyrocketed over the last 10 years, and these bills contain the government’s fourth attempt to address this major structural failure—a ‘send-out-a-form’ approach. This measure will help, but it is not the fundamental solution that Labor policy would provide. Many people lose contact with their account and never collect their savings. Fees and charges can erode final retirement income. The administration of lost accounts imposes an additional cost. Under Labor’s plan, the tax file number will be used annually to automatically transfer lost accounts into the current or last active account. Under the plan, individuals will have the opportunity to opt out, and automatic consolidation will not apply to defined benefit schemes.

Exit fees are another barrier to consolidation. Labor will prospectively prohibit excessive exit fees, while permitting an administrative transfer fee.

As well as those measures, Labor will ensure that financial disclosure documents are simplified and standardised. The implementation of financial services reform—with two so-called ‘refinements’ to date—has resulted in complex super fund offer documents that often run to 50 or 100 pages. Such documents are often unreadable and they have imposed a significant cost and compliance burden on industry and consumers. Disclosure documents that are unreadable may do more harm than good. This is another example of the Liberal government’s red tape and policy failure. Labor will be announcing further measures to reduce regulatory red tape and improve consumer awareness and incentives to save.

One of the most enduring benefits of compulsory superannuation has been its impact on financial literacy within the community. Many more people are now interested in finance and savings than two decades ago. More Australians are investors—both retirees and those still in the workforce—and our nation’s wealth is higher as a result. This has also led to a revolution and great expansion in the financial advice industry. Labor recognises the value of advice; it can quite often make the world of difference to someone’s standard of living in retirement. As someone famous once remarked, we do not plan to fail, we simply fail to plan. I think this is true in investment matters as well as many other areas of life. I am very conscious of the value that good advice can offer, and that the regulation of advice needs to be effective and appropriate—rather than counterproductive, as has been some of the experience of the industry in recent years. I am committed to ensuring that the excessive red-tape burden on the industry is removed and I call on the government to finalise the FSR streamlining process which has now dragged on for years.

As I indicated at the start of my speech, Labor supports these bills. They provide an improved retirement income for many in the Australian system and they are a welcome boost to simplicity. But by implementing the additional policies I have referred to, a Rudd Labor government will build on the foundations of two of Labor’s great policy achievements—the age pension and compulsory superannuation—to further improve the retirement income security of all Australians.

Harry Quick (Franklin, Independent) Share this | Link to this | Hansard source

Is the amendment seconded?

Mr Tony Burke (Watson, Australian Labor Party, Shadow Minister for Immigration, Integration and Citizenship) Share this | Link to this | Hansard source

I second the motion and reserve my right to speak.

Michael Johnson (Ryan, Liberal Party) Share this | Link to this | Hansard source

I am pleased to speak on this very important Tax Laws Amendment (Simplified Superannuation) Bill 2006, which I know the constituents of the Ryan electorate, which I very proudly represent in this parliament, will have a deep and abiding interest in. I am pleased to hear from the shadow Treasurer that his party also supports this government bill. I certainly look forward to hearing more detail from him and his colleagues on superannuation, which is of course part of the overall economic security of Australians. He talked about wealth creation and wealth security for Australians. That was somewhat hypocritical because Australians in this country today under the Howard government have far more economic security and are far more secure in their family lives and in their financial futures than they have ever been under any Labor government. I would certainly prefer to have the current administration running the policies of this country than the opposition.

The important thing that this bill raises is economic security for Australians. As I said, part of that economic security is people’s superannuation, because we are living in a time when people are living longer and they want their future financial security to be assured. This government is very keen to ensure that Australians have financial security into their old age. The changes that this bill brings to our superannuation architecture are very important.

Australia’s superannuation pool is set to hit the $1 trillion mark some time in the next few months. This is very welcome. I think it is important that credit is given where it is due. All members on this side of the chamber acknowledge that the superannuation initiative came from the Labor Party when it was in government. But the disappointing aspect of all this is that the Labor Party does not support the Howard government when it comes up with good policy and good initiatives. That is a reflection of the thinking of the current Labor Party.

We do not want to rest on our laurels about the superannuation pool and structure; we want to improve it and ensure that Australians embrace superannuation as the best way to protect their future. That is why the Howard government is very keen to continue reforms and continue to bring in policies that will really make a difference.

The shadow Treasurer was talking about how his side of politics should claim all the credit. None other than a former Labor minister has praised the Howard government and the Treasurer for the bold initiatives that it is bringing into policy and legislation. I think it is very important that we tell Australians when a former Labor minister responsible for the area of superannuation gives huge points to the Treasurer and the government for bringing in bold superannuation initiatives and not let that go unnoticed. I certainly do not want it to go unnoticed here in the parliament and leave my constituents in Ryan out of the loop on what the two sides of politics think about superannuation policy. In an article in the Australian in May 2006 former federal Labor minister Susan Ryan talks about the differences between the government’s superannuation ideas and policies and those of Labor. It is very instructive and telling. I would like to quote from this article because I think it is very relevant—certainly it is for Ryan taxpayers. I quote:

Where does the plan leave Labor? Not scrabbling around in the stale detail of yesterday’s policies, I hope.

Big challenges remain: helping the low-paid to save enough for the tax-free stage to matter, or finding ways to compensate women for super lost from years out of paid work caring for families. Maybe faced with the Treasurer’s bold gazumping of Labor’s cherished but slightly shabby super property, the Opposition will find the resolve to get another big picture worked out, and the wherewithal to let voters know about it.

They certainly have not done that. They do not have any ideas at all about superannuation in 2007 and about letting the voters know about it. It is important in this country that we encourage a culture of saving. It is important that we inform young Australians in particular that it is important to keep one eye on the future because there will come a time when they will need resources at a latter stage of their lives.

The reforms are the biggest changes to happen to superannuation for two decades. There is absolutely no doubt about that. As I said, the former Labor minister Susan Ryan endorses that view. I know that the opposition do not agree with that, but of course they would not in their current position. It is expected that these reforms will impact over 10 million Australians, 1.3 million employers and more than 310,000 superannuation funds.

The proposed changes were outlined in the working paper ‘A plan to simplify and streamline superannuation’ which was released as part of the budget. Following the release of that working paper, the government received over 1,500 written submissions and more than 3,500 phone calls from the community with comments and suggestions about the reforms and the transitional arrangements. Together, the reforms and the transitional arrangements represent a massive $7.2 billion investment by the federal government to simplify and streamline Australia’s superannuation system.

The complexities of the old superannuation system were staggering. I will give an example of the circumstances in which an Australian, maybe in the latter stages of their life, was meant to digest the complexity of the superannuation architecture as it existed. I will use the words of the Treasurer in his address to the National Press Club in May 2006 because they are helpful in explaining how difficult it is for an older Australian to comprehend the complexity of superannuation:

If you have a pre July ’83 contribution, 5 per cent is taxed at marginal tax rate. If you have a concessional contribution 5 per cent is taxed at marginal tax rate. If it’s an undeducted contribution that part is exempt. For invalidity post June of 1994 that part is exempt. If it’s a capital gains tax roll in that part is exempt. If it’s non-qualifying, that part is taxed at marginal rates. If it’s post June of 1983 you have a threshold and if it’s excessive it’s 38 per cent.

For everyday Australians, facing this sort of scenario in handling their superannuation portfolio really is too much. I am delighted that the government is taking this very bold initiative to redress the complexity in our superannuation architecture. It is that kind of complexity which diminishes Australians’ overall confidence in our superannuation system’s ability to provide for them adequately in their retirement.

Following these reforms, the sort of circumstance I just touched on will be abolished and replaced with one simple rule—that is, if you are over 60, whether you access your superannuation as a pension or as a lump sum, you will pay no tax. Not only will this reduce complexity but the government estimates it will boost an average weekly retirement income of $1,000 by $170. The changes will reduce complexity not only for retirees but also for superannuation funds and employers. I would trust that any drop in administrative costs experienced by the superannuation industry would be transferred to the consumer through a lessening of the administrative fees they charge, because we know that the superannuation industry is swimming in almost $1 trillion of funds.

Where previously a person’s superannuation benefits had to be paid out when that person reached 65 and was no longer gainfully employed, those sections of the legislation will be repealed under this bill and the person will now have the option to leave their benefits in their superannuation fund indefinitely, withdrawing as much or as little as they choose at any time after their preservation age. In order to minimise the risk of people abusing these very generous reforms, restrictions will still apply to the amount someone can place in their superannuation fund as a tax deductible contribution. However, the limits will be simpler and fairer with the old cumbersome age limits scrapped in favour of one single limit of $50,000 per annum in pre-tax contributions and $150,000 per annum in post-tax contributions. Not only will this negate the risk of people abusing the system as a tax haven, it will also enable younger Australians to save more and save earlier by removing the $15,000-plus contribution limit for under 35s.

It really is important that all of us encourage younger Australians in our electorates to consider their financial position and the amount of money they can put into their superannuation funds. Clearly young people have been amongst the biggest winners from these sweeping changes to superannuation unveiled in the budget, with the abolition of the age based limits on deductible super contributions from 1 July 2007. It certainly does make super far more attractive to generations X and Y and, in particular, to those in self-employment who have the capacity to invest in their superannuation schemes.

On this side of the House, the small business constituency is a very high priority. I only wish that those opposite would share our view and our philosophy of giving more attention to and showing more affection for the small businesses of our country.

Michael Hatton (Blaxland, Australian Labor Party) Share this | Link to this | Hansard source

Mr Hatton interjecting

Michael Johnson (Ryan, Liberal Party) Share this | Link to this | Hansard source

I notice the honourable member for Blaxland is sitting opposite. He is probably one of the very few members on the Labor side who might pay attention to small businesses in his constituency, as perhaps would the shadow minister for immigration at the table, the member for Watson, but I am not sure that they really do have the affection for small business that we do. They probably tolerate small businesses but we are the ones who love small businesses. On this side of the House we have a very deep affection for small business. I doubt very much that anyone in the small business community across the length and breadth of this great country would change their view on that, especially when it comes to economic security and the good policy that keeps the businesses of this country profitable.

We all know that small businesses account for some 95 per cent of businesses in Australia. They employ some 3.3 million people and account for 30 per cent, or over $300 billion, of Australia’s GDP—no small amount. It needs to be said again to those who try to diminish the achievements of the Howard government that 1.9 million new jobs have been created since 1996, when the Howard government came to office, because of the policies we have introduced, which are all about enterprise and all about innovation.

A lot of these Australians are self-employed. Not only are a lot of people in small businesses working in their businesses and investing in them but a lot of them have their entire lives resting in their small businesses. The link to superannuation, therefore, is absolutely vital.

One of the very shameful legacies of the pre-1996 superannuation changes is that self-employed people have often been treated as second-class citizens when it comes to saving for their future. They are a critical section of our Australian community. They are the drivers in so many ways of our prosperity and economic growth. We need to ensure that superannuation is front and centre for them as well as it is for those who are employees in companies across the country.

Under the existing system, self-employed people face a number of additional restrictions: different tax deductibility rules, which means they have to contribute more money to achieve the same tax deduction as someone who is employed; no tax deductible super contributions can be made on their behalf once they reach the age of 69; and they are not eligible for the government’s co-contribution scheme.

Under the new simplified superannuation reforms, the special restrictions on the self-employed are removed, allowing them to get a 100 per cent tax deduction for super contributions up to the new limits. I welcome this very much and I know that the small businesses of the Ryan electorate will be thrilled at this new provision. Also removed is the age limit on tax deductible super contributions. Self-employed people will be treated the same as employees and will be allowed to claim a full tax deduction up to the new limit until the age of 75. Finally, the co-contribution scheme requirements have been streamlined so that as long as a person earns over 10 per cent of their income from carrying on a business or gainful employment, and they are under the age of 71, they will be able to utilise the scheme. This will enable self-employed people to access this already generous federal government initiative.

The reforms contained in these bills will also make changes to the way superannuation companies deal with lost superannuation. As Australia’s workforce becomes more mobile and more flexible under the workplace relations regime—which we will take to the Australian people later this year and which I am sure they will endorse very strongly—there will be more cases of superannuation funds being forgotten about and not rolled over when workers change their employment or their circumstances. We will ensure that this lost superannuation, which really is a staggering amount—some $9.2 billion I understand across more than 13 million accounts—will be addressed. Under current arrangements, when a fund cannot contact a person, once they turn 65, the balance of their account is transferred into the coffers of the state in which the fund is based. This presents a number of problems when people try to reclaim the money. We want as much as possible to make it easier for Australians in these particular circumstances to be able to reclaim the money that they are entitled to.

In conclusion, I support this bill very strongly. It is very welcome in the Ryan electorate and amongst small business owners. I am pleased that the Labor Party will support it. It is about time that they supported something that was in the national interest. I do commend them for supporting it. Of course, it is very disappointing that in June last year they were not able to support us, but they have decided that it is in the interests of the wider community that they do support us. I guess it is better late than never. A month after the budget was delivered last was the time when my firstborn—young Ryan Andrew Johnson—came into this world. It is now February 2007, some 7½ months later, and it is great that the Labor Party are supporting a government bill. It is quite a while, but better late than never. I thank them for supporting a very important government initiative. I know that the good people of Ryan will be very pleased these critical bills are being supported by the federal Labor Party.

Michael Hatton (Blaxland, Australian Labor Party) Share this | Link to this | Hansard source

I note, following the member for Ryan, that he is the single government speaker apart from the minister in relation to the Tax Laws Amendment (Simplified Superannuation) Bill 2006 and the 10 cognate bills that are supposed to be the biggest package the government has ever delivered on super and tax. The fact that only one government member can get up and defend what the government is doing is a complete disgrace. I will note this in passing as well: despite my affection for the member for Ryan, his wife, Huyen, and his son, Ryan, the gestation period for Ryan Johnson was nine months; the gestation period for this bill is equivalent to that.

The last point that the member for Ryan made was about how long it took Labor to say anything positive about this. The actuality is that the plan for a suite of legislation in the future was outlined by the Treasurer in the last budget. The last budget was how many months ago? It was May 2006, was it not? The Treasurer boldly announced what he regarded as the greatest change in superannuation in Australia. But it was a plan for superannuation changes and not the actuality. One can have an intent or a plan for a child, in the case of Ryan Johnson, but the actual realisation of that comes about nine months later, unless there are complications and the child comes early. Here we are in February 2007. Count the months. It is about nine, I think—the same gestation as a child. Luckily it is not an elephant of a bill or we would have had an 11-month gestation period! It took from May 2006 until the Treasurer finally indicated a little while ago that we would get legislation in this area. What was he doing in the meantime?

In the budget, he trumpeted a plan to change super. He said: ‘We’ve got this plan. We want all the people affected, all the vested interests in the country, all the superannuation groups, all the companies involved in this vast industry, to comment on this plan and then we will eventually come up with’—although he never actually said it this way—‘a realised plan and then an action plan and then we might move and put a bill for an act together so that we can actually get some legislation with regard to this.’

This is extraordinary stuff. Do you know what the fundamental basis of these 11 bills is, Mr Deputy Speaker? Instead of people being taxed on the way out, they will be taxed elsewhere. They have not made a great deal about this. We have 11 bills here in a cognate debate. We have tax bills and super bills. As the member for Fraser well knows, not only because of his experience in the Senate but because of his experience as Assistant Treasurer, a job he did well and cleverly—and this is something he knew when he opened the Bankstown branch of the Taxation Office, as he knows it now—if you introduce these kinds of super changes with an impact on the tax act, you have to have two separate bills. That is the nature of our constitutional arrangements.

The person we have acting as Treasurer now, who could not come up with legislation to be announced at the last budget, came up with a plan to be determined. What have we got? Guess what: when you put money into super it is still taxed going in. When you accumulate money, it is still taxed on the way through. The only fundamental thing that they have really done here is to cut the tax on the way out. Well, whoop-de-doo. This is supposed to be the greatest change in super that we have ever seen, introduced at that dispatch box in May 2006 after 7.30 pm—I think it was about 21 minutes to eight on budget night. The Treasurer said, ‘This is the greatest and most profound thing ever done in superannuation in Australia,’ and that was entirely false. All he has done is say, ‘We won’t tax this bit,’ and make a few other changes. And he has the gall, the temerity, to say that he is really simplifying superannuation. Give me a break!

Since 1996, when the government came into power, they have complexified super. They have made it more difficult and they have come up with the dumbest series of arrangements you could imagine. They gull the public and say to people, in particular those people on lower incomes and those who came late to super: ‘Don’t worry about it. We’re going to give you choice. You can choose between these five or six or 12 different variants in relation to your super, and we think you will just love these little superannuation accounts here.’ It is like having an old passbook. This is a 19th or 20th century approach to a 21st century problem. You have your passbook account and you get the passbook stamped as you go in and you say: ‘Gee, when you have a look at it, inflation is running at 2.9 per cent per annum. What are they going to pay me? They’re going to pay me 0.8 of one per cent. That’s a bit rough. If I do my arithmetic, I think I will be 3.1 per cent behind,’ or whatever.

The Treasurer is saying to people, ‘Don’t worry about the complexity of all these other super things; you can have a retirement savings account.’ If you were really dumb, you would take what the Treasurer says and act on it. If you were uninformed, you would do that. If you were in a position where you did not know you were being taken down by a Flash Harry of a Treasurer, then you might get done.

This is a complex area. It does demand simplification, but my simplification, the Labor Party’s past simplification, actually has real dollars attached. I will tell you how many real dollars are attached to it, Mr Deputy Speaker: 65,000 million real dollars, $65 billion of superannuation investment that has come out of the pockets of ordinary working people in Australia and gone into super. This trumpeter of nothingness, this Treasurer who claims that he has remade the world, is simply riding on the back of what the Hawke and Keating governments did, riding on the back of the former member for Blaxland, who did the hard yards on this.

I am sorry, but it was almost too much for me today in question time, as it was yesterday, to have this fraud of a Treasurer saying that the fundamental changes in this area have been made by this government. That is completely and utterly ludicrous and everybody in Australia knows it. It was not easy—as the member for Fraser full knows, because he was a participant in the processes that put these changes together—to get fundamental superannuation changes made. Why? Because Australian people, love them as we do, did not want to put money into a savings account or a super account. They wanted the money in their kick.

Bob McMullan (Fraser, Australian Labor Party, Shadow Minister for Federal/State Relations) Share this | Link to this | Hansard source

And because John Howard opposed it.

Michael Hatton (Blaxland, Australian Labor Party) Share this | Link to this | Hansard source

John Howard opposed it, as the member for Fraser rightly interjects, every step of the way. The people wanted the money in their kick, in their pocket. They could not see the reason why they should go without.

I happen to know about this because, from 2 January 1985, for 11¼ years, I ran Mr Keating’s electorate office. I was intimately involved in government matters, not just at electorate office level but at a policy level as well, across a whole range of things. I know the person who constructed Labor’s superannuation program, in consultation with the Treasurer and others. He happens to be called Ken Henry, and he is the current Secretary to the Treasury, one of the greatest servants this Commonwealth parliament and the people of Australia have ever had, an extremely smart person. I discussed the innards of what we were doing with super with Ken Henry in the Treasurer’s Parliament House office as it was being constructed.

I know how difficult, indeed impossible, it was to get Australian punters to front up and say, ‘I won’t put it in my kick; I’ll actually invest this for the future.’ If it was putting it on a nag at the Sandown races or doing a bit on the Melbourne Cup, people might understand it. But when it came to saying to people, ‘We want you to voluntarily provide for your future,’ well, the reality was we tried that for three years, and guess what happened? Nothing, virtually. As much as we tried to convince, argue, debate with and cajole the Australian public to come at this, they really did not want to pick it up. So the government was forced to legislate the superannuation guarantee. And it is the nine per cent superannuation guarantee that provides $65 billion of ballast not just to the Australian superannuation industry but to the Australian economy.

I know the effect of this and I know the fundamental design. Paul Keating’s view was that there was only one way we could escape one of the great tyrannies of Australian economic history, that of being almost entirely dependent on money coming in from overseas, whether it was a case of simply attracting it through higher interest rates than were available elsewhere—and it is still a commonality for Australia that to get the investment in we have to have higher rates than the United States and Europe—or whether it was to attract investment across the board if it was not just in physical assets. The whole history of Australia is that Australians have never been able to buy the farm because we have not had the savings base to do it. That is why various Europeans, Americans and people from the Middle East have all had their go in the long line of peoples who bought into Australia and made profits. But it has not adequately returned to the Australian people.

Paul understood very clearly exactly what needed to be done. We not only needed to get Australians to help to provide for themselves for the future because the age pension simply was not going to be enough, but we had to go further. Our stock market is structured in such a way that we did not have the depth that was needed. Once you go beyond the blue chips, which were well supported, there was not the depth that was needed at the second and third tiers so that the billions of dollars, running into the trillions, that would be poured into the market through Australian superannuation would percolate to every level—so that once the blue chips were filled to capacity it would overflow in a cascade into the other areas in investment activity. Look at the drivers now. For instance, there is a Western Australian superannuation company, a government employee company, that is a part owner of Bankstown airport in my electorate. Look at the fundamental underpinning of so much of our corporate activity: it is Australian industry superannuation funds. This is ballast for the broader economy that Labor created, and that is the foundation of our current prosperity.

This Treasurer has fraudulently argued that this government has done all the hard stuff. I will just remind the House of what this Treasurer has done. Faced with the budget situation we had, Mr Keating, when he was Prime Minister, changed what was going to be a tax cut into super. We did two things with the l-a-w tax cuts which this Treasurer from this dispatch box has, time and time again, fraudulently argued that we just frittered away and did nothing with it. I will also mention in passing something else he has made claims about. The first four surpluses ever for any Commonwealth government of Australia were in the Hawke-Keating years. The member for Bennelong when he was Treasurer did not put a surplus budget in, or go anywhere near it. He left us with a $9.6 billion deficit as he exited office but he did not even have the courage to own up to that. He said it was about $4 billion and when pressed a week before the election he said it might be about $6 billion. The member for Bennelong knew full well, because he had been briefed on it, that it was in the order of $9 billion to $10 billion. This Treasurer talks about the $96 billion worth of debt that he says was Labor debt. But, Mr Deputy Speaker, if you take $9.6 billion in March 1983 and extrapolate the value from then until now, the member for Fraser, who was an assistant Treasurer and has great arithmetic abilities, would be able to tell you that that would now be in the order of $40 billion to $42 billion that would be directly attributable to John Howard, the member for Bennelong, when he was Treasurer. That broke the back of the Australian economy and it took our government to lead us out of that.

The changes made in super and the superannuation guarantee, which the member for Bennelong and others on the government side voted against time and time again, are the foundation stones of modern superannuation. And guess what? It is nine per cent because this government came to office—this coalition government that does not believe in giving a fair go to the baby boomers who started late and who will still be relatively impoverished as a result of the measures that are coming through here. They are fine for the young people, but adequate provision has not been made for the baby boomers. And guess what? The baby boomers will not be 12.6 per cent of the total cohort in Australia in terms of age versus everyone else. Guess what? It is 25 per cent. You then have a look at how you adequately provide for them. In terms of aged care, under the Hawke-Keating government there was 15 per cent growth year on year in hostel places, a dramatic change in the way in which nursing homes were dealt with and the way in which they were built and funded. There was also a dramatic change in assisting people to be in their own homes. Why? Guess what? Something that this Treasurer invented or discovered, he thought—he said he really invented it, I think, just a couple of years ago—and that is intergenerational change. The baby-boomer phenomenon means we will have a doubling of that age cohort, and they have not saved as they should have because the circumstances have changed. What did this government do on coming to office? What did this Treasurer do? He said, ‘Oh, this is l-a-w tax cuts so they’re not going to be delivered.’

Under the impressive circumstances at the time, Prime Minister Keating said this: ‘Where we were going to give these as tax cuts, we are going to do two things. One, we are going to give some tax cuts one year early—that is, half of it, the first tranche, will be delivered a year early. Second, the other half will be changed into superannuation contributions—a full three per cent extra to take it from six to nine per cent of super.’ If we had been re-elected we would not now be at nine per cent superannuation guarantee but at 15 per cent superannuation guarantee. The current federal Treasurer is just like Bob Menzies, who, in the early 1950s, ripped away £100 million of pension funds that had been put away since 1947 and put it into consolidated revenue. This Treasurer took funds that would have gone into taking us to 12 per cent and then 15 per cent superannuation guarantee—not $65 billion a year but building into the trillions of dollars of ballast for the Australian economy. That is what a farsighted, instrumental, activist government led by a clever Treasurer and then Prime Minister does.

What this bunch has done is simply take that and ride on the back of it to provide certain benefits to people who are better off. The vast majority of people in the baby-boomer class that Howard has treated as battlers will continue to battle throughout their whole time. There are other provisions here in relation to people who are 60-plus and in relation to people who are 70-plus. The current Treasurer and Prime Minister will allow these people to work longer and allow them to build up a bit more because they have not saved before, but over more than 10 years they have deprived them of the capacity to build what is really the minimum—15 per cent superannuation guarantee. Instead of this we have an expensive set of bills which do more for those people who already have rather than for those who were not compelled to save beyond the nine per cent.

We will support this going through, and I will support our amendments in relation to it. But it is a travesty of the first order that a Treasurer of the Commonwealth of Australia can so lazily claim that this is such a magnificent achievement when it is in fact a total repudiation of the needs of the Australian people. (Time expired)

Peter Dutton (Dickson, Liberal Party, Minister for Revenue and Assistant Treasurer) Share this | Link to this | Hansard source

I will start by saying what an excruciating speech that was from the member for Blaxland. Anybody who looks at that contribution should check the facts of history to realise just what a misrepresentation and fraud it was to present history in relation to superannuation in this country in such a way. In the true tradition of, certainly, his immediate predecessor he is operating in some sort of fantasy world where they misrepresent their own gains. Really, if we are talking about a debate on economic matters, they brought this country to its knees—particularly those in small business and those who had mortgages. For his contribution today he brings shame on himself, and it is a recognition that the Labor Party are completely unable to continue as an alternative government of this country. They are economically irresponsible and they would inflict on small business in this country the same pain that they did through the 1990s.

To those other members who have contributed constructively to the debate on the Tax Laws Amendment (Simplified Superannuation) Bill 2006 and related bills, I thank them for their contributions. These bills are important bills for the House to consider at this time. Simplified superannuation is a broad ranging suite of reforms to superannuation taxation, the age pension assets test, superannuation contribution rules and superannuation payment rules. The centrepiece of the reforms is making superannuation benefits tax free if paid from a taxed fund to Australians aged 60 or over.

Other key aspects of the reforms are: to significantly lower the tax paid on superannuation from an untaxed fund for people aged 60 and over; to replace age based limits with streamlined contribution rules; to improve contribution incentives for the self-employed, including extending the highly successful government co-contribution scheme to the self-employed; to halve the assets test taper rate; and to rewrite the superannuation taxation law to present a clearer picture of superannuation taxation and reduce compliance costs and the regulatory burden faced by business and other taxpayers.

I welcome the belated support of the ALP for these bills, as indicated by the member for Lilley. The member for Lilley raised the issue of tax file number quotation and liability for excess tax where someone fails to quote their tax file number. The requirement for members to quote tax file numbers to their superannuation fund is critical to the integrity of the new superannuation system and to the enforcement of the contribution caps. This has been acknowledged by the superannuation industry and is one of the key trade-offs associated with the removal of end benefits tax and reasonable benefit limits. Without tax file numbers there would be scope for significant abuse of the superannuation caps and for people to access unlimited superannuation concessions. The liability for additional tax as a result of the failure to quote a tax file number is entirely avoidable and the government strongly encourages all individuals to provide their tax file number to their superannuation fund. Increased provision of tax file numbers will also greatly reduce the number of lost superannuation accounts.

These bills implement the most significant reforms to the taxation of superannuation in our country’s history. They will sweep away the current raft of complex tax arrangements that apply to superannuation, improve incentives to save, increase retirement incomes and strengthen incentives for older Australians to stay in the workforce. This is the latest demonstration by this government to show that we are more capable than ever of continuing wise economic management of this economy to make sure that in the time of an ageing population we continue to put the interests of the economy first to make sure that we have retirements enjoyed by more people than ever before, and certainly more than ever would have been the case under the Labor Party.

We have been able to implement this policy because of sound economic management over the last 10 years. We have been able to afford this policy because we have repaid Labor’s $96 billion debt. Never forget the $10 billion a year in interest that went towards servicing that debt, and whilst ever we continued to service that Labor debt we would never have been able to afford these sorts of policies. This policy is evidence again that the coalition is much stronger in terms of its capacity to deliver economic management to this country and at this time, with the threats both internationally and domestically that lie ahead for the Australian economy, this shows that the Australian people have again made the wise choice. As a package, the simplified superannuation bills represent a substantial investment by the government in the standard of living of Australians in retirement and the country’s future economic prosperity. For those reasons I commend these bills to the House.

Harry Quick (Franklin, Independent) Share this | Link to this | Hansard source

The original question was that this bill be now read a second time. To this the honourable member for Lilley has moved as an amendment that all words after ‘That’ be omitted with a view to substituting other words. The question now is that the words proposed to be omitted stand part of the question.

Question agreed to.

Original question agreed to.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.