House debates

Thursday, 13 September 2007

Superannuation Legislation Amendment Bill 2007

Second Reading

Debate resumed from 21 June, on motion by Mr Nairn:

That this bill be now read a second time.

10:00 am

Photo of Chris BowenChris Bowen (Prospect, Australian Labor Party, Shadow Assistant Treasurer) Share this | | Hansard source

The purpose of the Superannuation Legislation Amendment Bill 2007 is to make changes to the Australian government civilian and military superannuation schemes. Labor supports this bill, but our concern is not about what is in it; it is about what is not. From 1 July 2008 this bill will remove the requirement for contributory members of the Commonwealth Superannuation Scheme, or the CSS, to make member contributions to the CSS, thereby making all member contributions voluntary and providing members with the same flexibility and incentives to contribute to superannuation that are available to the broader community.

It also allows, from 1 July 2008, eligible members of the Public Sector Superannuation Scheme, or PSS, to elect to leave that scheme to join another superannuation arrangement for the payment of future contributions, which will allow eligible members the flexibility for future contributions that is already available to most of the Australian workforce. From 1 January 2008 it enables members of the CSS to obtain early release of their funded account balances on severe financial hardship and compassionate grounds.

It provides from 1 January 2008 for the prospective restoration of previously cancelled spouse pensions. It makes consequential and technical amendments and ensures that the entitlement to benefits in the Defence Force Retirement and Death Benefits Act 1973, or the DFRDB Act, relating to post-retirement marriages is consistent with the treatment in civilian schemes. Finally, it addresses an anomaly in the treatment of the benefits payable in that act upon marriage breakdown.

A hearing was conducted by the Senate Standing Committee on Finance and Public Administration on the act, which I will be referring to later. The Superannuation Act 1976 includes a requirement for contributory members of the CSS to pay basic member contributions of five per cent of their salary for superannuation purposes. This bill includes amendments to the CSS Act that will remove the requirement and allow CSS contributors to elect, on or after 1 July 2008, to cease making member contributions. Amendments to the Superannuation Act 1990 are not required as the necessary changes for the PSS will be made by the APSS amending deed.

The PSS Act provides eligibility requirements for membership of the PSS and generally only allows members to cease contributing on leaving employment or retirement. The bill includes amendments to that act that would allow eligible PSS members to elect to cease membership of the scheme, preserve their accumulated PSS benefit and have their future employer contributions paid to an accumulation scheme, thereby having access to the government’s broader fund arrangements. These changes will commence on 1 July 2008.

The bill also amends the Superannuation Act 2005 to allow eligible PSS members who have elected to join the Public Sector Superannuation Accumulation Plan, or the PSSAP, to become members of that plan. Whilst Labor is supportive, I must say, frankly, individuals who elect to reduce contributions will be disadvantaging themselves and should carefully consider such action, particularly seeking advice from the fund or other financial advice about the financial detriment of doing so.

The bill contains amendments to the CSS Act that will, from 1 January 2008, enable CSS members to obtain early release of their funded account balances on severe financial hardship or compassionate grounds to the extent allowed under the regulatory framework established under the Superannuation Industry (Supervision) Act 1993. The bill will enable the positive restoration of pensions for persons who have previously had their spouse pensions cancelled upon remarriage. Prior to 1976 in the Superannuation Act 1922 civilian scheme and 1997 in the Defence Force Retirement Benefits Act 1948 and the DFRDB Act, spouse pensions were cancelled on remarriage.

Cancellation never applied in the PSS, CSS or military superannuation scheme. Although provisions cancelling spouse pensions on remarriage were removed from the 1922 act scheme in 1976 and the DFRB Act and the DFRDB Act schemes in 1977, spouses who remarried before the cancellation provisions were removed continued to be affected by the former provisions. From 1 January 2008 restrictions on the restoration of spouse pensions that were previously cancelled when a spouse remarried will be removed prospectively upon successful application. The changes will also apply to persons who have previously had their spouse pension only partially restored.

The bill also includes, as I referred to earlier, amendments to the CSS act as a consequence of the government’s Better Superannuation reforms. The main amendment will ensure the continued payment of employer productivity contributions for a member who cannot make member contributions because they have not provided their tax file number. This is consistent with the arrangements in the broader community, where employer contributions would still be payable even though the member has not provided their tax file number.

The Better Super reforms generally commence from 1 July 2007. The amendments in relation to the CSS Act may commence between 1 July 2007 and 1 July 2008, depending on the particular amendment. Amendments to the PSS Act are not required as the necessary changes will be made by the PSS amending deed.

The bill also amends the DFRDB Act to improve access to reversionary benefits in certain circumstances where the retired pensioner commenced a marital relationship after the age of 60. Currently a spouse’s pension under the DFRDB Act scheme is generally not payable if the pensioner who commences a marital relationship after the age of 60 dies within five years of the relationship commencing. The bill removes the restrictions on the payment of benefits following such post-retirement relationships. However, a pro rata rate of a spouses pension will be payable where the relationship existed for less than three years immediately before the pensioner’s death. Where the resulting rate of the pension is small, it may be commuted to a lump sum in some cases. These amendments will also apply to the MSBS and the necessary changes will be made by amending the MSBS trust deed and rules.

It is proposed that the new postretirement marriage arrangements will commence on a day or days to be fixed by proclamation or six months after this act receives royal assent. These changes will ensure consistency between the military schemes and the civilian schemes. Labor believes that this should date from the operative date for the civilian schemes—namely, 1 July 2003. There was no satisfactory explanation given to the Senate Standing Committee on Finance and Public Administration for why this did not happen. The parliamentary secretary has indicated consideration of act of grace payments. The number of people advantaged by greater retrospectivity is very small—less than 10 a year—so the associated cost is negligible. Certainty and consistency should apply to widows and Labor asserts that it would be better if this were covered by the act rather than act of grace payments.

The bill will address an anomaly in the family law provisions of the DFRDB Act to allow family law orders to be applied as intended. As the current legislation stands, family law orders only apply to a current lump sum or pension. This amendment only applies to a second and subsequent or later pension or lump sum that is paid as a result of a period of effective service that begins on or after the day on which this amendment commences.

The amendments relating to voluntary member contributions for CSS members and a choice of fund for PSS members are part of a package of measures announced in the 2007-08 budget which overall will cost approximately $160 million over four years.

As I said in my opening remarks, what causes the opposition concern is not what is in the bill; it is what is not in the bill. There are a range of contemporary issues that need to be considered, particularly against the background of the various reforms to private sector superannuation that have occurred over the past 20 years. These issues include indexation provisions of pension entitlements; interdependent relationship reversion pension benefits, a promise made by the Prime Minister but not delivered upon; the tax increase that members of the MSBS will suffer as a consequence of the 1 July Better Super changes; the ability to salary sacrifice; real super choice and portability; the value of the 10 per cent rebate for untaxed schemes and income tax treatment of non-super income at age 60; the foreign defined benefits schemes such as those covering the Australian staff working for the United Nations—again, consequences of the 1 July Better Super changes; transition to retirement provisions; and the tax treatment for class A military invalidity pensions.

Again, many of these matters were canvassed at the Senate finance and public administration committee hearing into the bill, but very few answers were received from the government. Labor is particularly concerned that the various actuarial and other modelling carried out by the Treasury on a number of these matters has not been made public, despite constant requests by the shadow minister for intergenerational finance, Senator Sherry, at many Senate committee hearings over many years.

The government’s response to Labor’s concerns in the matter of superannuation in military matters has been arrogant to say the least. They have arrogantly said there is no problem and that the Labor Party do not know what we are talking about. The veterans community would certainly beg to differ and has certainly been very vocal in support of the Labor Party’s position, as the Labor Party has been very vocal in support of the needs of veterans. That has been articulated by the shadow minister for veterans affairs and by the Leader of the Opposition, who has made this a priority for the opposition. The shadow minister for veterans affairs will be following later in the debate. He will be moving a second reading amendment which refers to some of the matters I have addressed in these remarks.

10:11 am

Photo of Jackie KellyJackie Kelly (Lindsay, Liberal Party) Share this | | Hansard source

The coalition government has consistently worked to provide incentives for Australians to boost their retirement savings. The record of this government on superannuation is exemplary given the 13 years of mismanagement under Labor before the Howard coalition government came to office.

Let me remind you, in light of the amendments to be moved by Mr Griffin, that it was the Labor Party that actually defunded the Defence Force Retirement and Death Benefits Scheme, or the DFRDB. They took all of our veterans’ contributions in DFRDB, rolled them into consolidated revenue and left it as an unfunded Commonwealth scheme. It has been left to this government, in the form of the Future Fund, to come forward, to step up to the plate, to do the hard yards, to say, ‘No, you can’t spend this; no, you can’t spend that,’ to save the money and to build a Future Fund. And now we are looking at a situation where our Commonwealth service public pensions, our public sector public pensions and our Defence public pensions will be funded. They will not be an impost on my children. My children will not be paying double tax for something that the taxpayers of previous generations should have and have already paid for. So my children’s tax will be going to support their standard of living. With the Future Fund that we have reinstated you will see the veterans cared for by their own contributions and their own employer contributions, and that is how it should be.

There was a magnificent announcement yesterday by the Minister for Veterans’ Affairs of a support package worth more than $330 million to index veterans affairs disability pensions with MTAWE. That is something that the veterans community has been asking for. They have asked us to go further in terms of also pegging DFRDB with MTAWE. On our calculations, that is a $6 billion promise. I know Bernie and co. from the veterans community say: ‘No, it’s not that; it’s only $35 million. You can do this for $35 million.’ Heaven help us if the ALP ever get into government because, if they are taking those types of sums, making those types of rash promises and taking out—recklessly—$6 billion per annum, how many hospitals will go unfunded? How many schools will go unfunded? What will that do to our education sector? How do we respond to something like the equine influenza? When some outside shock hits our economy, where do we get the wherewithal to run with that?

The previous speaker was talking about contemporary issues within the veterans community. I have superannuation locked up in MSBS, Military Superannuation and Benefits Scheme, and I would like to see that rolled over. I, like everyone else who did less than 20 years in the military, would like to see our super rolled out. Certainly in the time I have been in parliament I have seen MSBS perform in a manner where, after administration costs, mine actually went backwards, whilst private sector funds were streaming ahead at 10 per cent and 15 per cent. But the cost of doing that is something that needs to be looked at and needs to be considered. It is certainly something that this government is looking at in a responsible fashion. Certainly the amendment which looks at removing the tax increase that applies to members of MSBS as a consequence of the recent Better Super changes is something that I would like to see passed. As for a few of the other issues that have been raised by the opposition in relation to military super schemes, we have restored the reversionary benefit for people who have remarried pre-1979.

The opposition want to implement the same date as that of the civilian schemes. This can be done by other measures. Again, it shows that they really want to use a hammer on an eggshell rather than working through, in a fiscally responsible manner, issues that are put to them by the veterans community and by the people who have funds invested in these unfunded schemes. They go on to a number of other contemporary issues, which no doubt have been canvassed widely amongst the various communities affected.

This government’s track record on superannuation is exemplary, and the opposition’s track record on superannuation is woeful. Every time they have seen a bucket of funds accumulated for people’s super, they have gone and raided the hollow log. Every time. Why would you put them in charge of the cookie jar once again? They have already spent the Future Fund on some broadband infrastructure for the bush or for Australia that we have stimulated the private sector to fund without any recourse to the Future Fund. On several other occasions we have seen the opposition wanting recourse to the Future Fund. Here, again, they are going to have recourse to the Future Fund to allow MSBS and DFA, Defence Families of Australia, to be rollovers. You should see their candidate in Eden-Monaro. He is an ex-military officer. He himself is facing the same fiscal issues that we all do given that we have investments in those schemes, and he has recklessly just proposed the expenditure of $6 billion for his party when he is not even in parliament yet. This is another example of the reckless disregard that the opposition consistently show on these issues.

These are complex issues with knock-on effects. I have no doubt that our veterans deserve an increasing standard of living and that it should keep pace with commensurate schemes in the community, but this should not be done at the cost of services that need to be delivered for our children, for the next generation, in critical things such as health, disability, care for our aged and education. We have slowly made major contributions to that with the establishment of our education fund. We see higher education consistently funded into the future. You are seeing from this government consistent financial investment to allow these matters to run the full course. Labor, on a whim, wish to race in and destroy 12 years of good, solid, hard work. I know our veterans communities can get impatient, but I ask them to bear with us. We will be giving a better service, a truer service over a longer period of time. I urge them to remember the ALP’s raid on DFRDB. That is what put us in this situation. Up until then we had a funded scheme. It was a scheme that would have seen us continue in the future independent of any call on taxpayers. Now we find ourselves in the situation that we are in today.

Let me go through the history of what this government has done on superannuation to give people an understanding of our commitment to people’s savings. We are serious about seeing elderly Australians living on something more than a straight-out pension, which is the very minimum standard below which we want no Australian to fall. We certainly want people who have been in employment all their lives, who have done serious work with the public sector and with the Defence Force, to really see the benefit of their super contributions and their savings over their lifetime and the same for those who, through various circumstances, have been unable to save and have found themselves totally reliant on a support pension in their retirement.

We have introduced a scheme for workers earning less than $28,000 where we contribute $1.50 for every $1 contributed by the low-income earner. That scheme runs up until someone is earning $58,000. Our co-contribution scheme means that $2,500 each year can be contributed to someone’s super and, after a lifetime on a low-income wage, they can retire with substantial savings in excess of a quarter of a million dollars and up to half a million dollars, which will have a significant impact on their standard of living in the future.

One of the important things in the Superannuation Legislation Amendment Bill 2007 is that it also makes provision for the circumstances of marital break-up, in which we frequently see the female severely disadvantaged if she has been in and out of work. We have looked at a tax rebate to encourage individuals to make superannuation contributions on behalf of their low-income spouses—that is, for the wife who stays at home or only has a part-time job so that she has time to look after children. I think one of the most important things that we do in life is take time out to look after our children. If you make the decision that you want to dedicate a substantial amount of your time to that, you should not be penalised by your super scheme. The ability to continue contributions throughout the time that you take out of the workforce so that in retirement you have a consistent and continuous history of super contribution is an important landmark that this government can be justifiably proud of.

There is capital gains tax relief for small businesses when they roll over their small business. That is a major saving. If a small business is rolled out for retirement purposes, it is free of capital gains tax. We have increased the deduction limits for superannuation contributions made by the self-employed. There are dollar for dollar deductions up to $5,000 for self-employed people. We find that a lot of mums work from home and that having their own job or small business allows them to superannuate themselves.

These are relevant issues because they show this government’s continuing dedication to improving the superannuation savings of not just our Public Service, our Commonwealth sector employees and our defence sector employees but the Australian public as a whole. You can trust this bill. You should go with the government on this one. You should ignore the ALP bleatings because in government they do something completely different and really do not manage super at all well. They now have a shadow minister for intergenerational finance. They never even understood it when they were in government. Do you seriously think they even remotely understand it in opposition? They did not even have a charter of budget honesty. They do not even do regular intergenerational reports. We have all of these reports established and reporting to parliament in an ongoing way to continually remind Australians about our ageing population, our financial obligations to those people, how those must be funded and how we can minimise the call on generations that have not yet had the benefit of their tax payments.

We have seen a number of improvements in a number of sectors. I have heard the defence lobby. I obviously have a lot of sympathy for it, given my own financial situation, but I would still stick with the government in coming up with the funds to fund it rather than the ALP’s raid on the Future Fund. That is irresponsible. There are ways of doing this. When Bernie and Keith Tennant and everyone can come up with the rigorous financial investigation into the costings of these things that can really nail it down and we can negotiate things, I think we can deliver for the veterans community in a way the ALP will never be able to. They can make all sorts of wild promises in opposition, but, with 12 years experience in parliament, I know that things are not as easy as the Labor candidate in Eden-Monaro might think they are. He is straight out of the military, obviously. He has realised his pension situation and wants to help his fellow diggers, as we all do. But the opposition amendments are irresponsible. Their promises are erratic and funded out of a mechanism that is just reprehensible. It leaves us in a situation where my children will be continuing to pay for pensions that should have been funded and paid for by the pensioners themselves.

We have a terrific record on superannuation. We have removed the work test for those aged under 65 so that these people can contribute to super at any time after 1 July 2004. We have introduced a new transition-to-retirement policy allowing Australians aged over 55 to access their superannuation as an income stream while remaining in the workforce. We have abolished the superannuation surcharge, giving a greater incentive for higher income earners to contribute to their superannuation. We have allowed superannuation benefits to be split between married couples who separate. That is doing something for females, who traditionally have been less well superannuated than males in our community. We have increased the safety of superannuation entitlements by requiring quarterly superannuation guarantee contributions rather than annual contributions because we were seeing a number of businesses leaving their employees high and dry in the private sector—and that truly was something the ALP did in government in the public sector. They were leaving them high and dry with the promise on the never-never that the future taxpayer would pay their pension for them. That is a serious intergenerational impost that we have corrected. The list on our record on superannuation goes on and on.

I urge the Australian community to understand this government’s rigour, experience, dedication and commitment to the retirement savings of Australians. We are economically sound. We have a proven track record. Why you would consider falling for the very empty promises of the opposition, who, when they were in government, hollowed out the log of the DFRDB, is beyond me. I commend the bill to the House and call for the amendments to be disregarded.

10:28 am

Photo of Alan GriffinAlan Griffin (Bruce, Australian Labor Party, Shadow Minister for Veterans' Affairs) Share this | | Hansard source

In speaking on the Superannuation Legislation Amendment Bill 2007 today I have a number of points to make. As has been mentioned earlier, I do have an amendment. I would also like to pick up on some issues from the previous speaker. I would like to start by saying to the member for Lindsay: all the very best. I know she is retiring at this election. I am happy to consider her to be someone on the other side of the House who I have a good deal of time for, and I wish her all the very best with her retirement. I am sure she will keep busy and lead a productive life. Having said all that—that is the nice bit, but then here is the catch—there are a couple of things that she said which I would like to try and address in the context of the circumstances around superannuation and the history of this area.

There is no doubt that defence superannuation is a very important part of the benefits provided to our defence community, and there are very good reasons for that. There are also very good reasons why, in many cases, it should be treated differently to others, because of particular circumstances around defence service. Also, it is true to say that it is an area where there have been a range of urban myths and legends have grown over the years with respect to what has actually happened historically with defence superannuation. I would like to pick up on a couple of those on this particular occasion. There are many in the veterans community who have accused Labor of dismantling the former defence superannuation scheme—the DFRB, the Defence Forces Retirement Benefits Scheme—in the early seventies. The member for Lindsay referred to that. Again, that is not really the case and it is not really clear. We need to understand the history of what actually occurred with respect to the changes to defence superannuation at that time.

The chronology goes something like this. In 1970, the then Liberal government, headed by John Gorton, formed the Joint Select Committee on Defence Forces Retirement Benefits Legislation in September 1970 to examine the operation and suitability of the Defence Forces Retirement Benefits Scheme. The committee provided its report, which was commonly known as the Jess report, to the Liberal government in May 1972. It concluded that the DFRB was unnecessarily complex. Its recommendations covered a range of things that included: the establishment of an entirely new contributory military super scheme on the grounds that DFRB lacked simplicity and was incomprehensible to servicemen; a recommendation that the new scheme be an unfunded scheme; a recommendation that all contributors to the DFRB fund be transferred to the new scheme; a recommendation that the retired pension be indexed to average weekly earnings; and a recommendation that the existing DFRB scheme, comprising members’ contributions, be transferred to the Commonwealth.

As is not unusual for a conservative government, the McMahon government, as it was at that stage, sat on the report for some five months. Then, on 26 October 1972, the last sitting day before the election, the Prime Minister at the time, McMahon, outlined his response to the review. His response was that the government would amend DFRB without creating a whole new scheme but would not change it to an unfunded scheme, and the matter of indexation was referred to an independent expert. McMahon indicated that amending legislation was already being prepared. The point I would like to make in relation to that is that, on the question of funded or unfunded, it took the government of the day five months to come to a conclusion, and then, in the shadow of an election that they were expected to lose, they got scared and avoided that particular recommendation.

When the Whitlam government assumed office on 22 December 1972, it accepted several of the review’s recommendations that McMahon had not accepted, such as the need for a new, simpler military super scheme which would be funded on a pay-as-you-go basis and the need to transfer DFRB members to the new scheme to ensure administrative simplicity. It referred the issue of indexation to an independent expert. The new military super scheme at the time corrected several disadvantages in the old scheme. Under DFRB, a member only received the age pension at 60; the new scheme was based on length of service, not age, allowing for the early retirement of defence personnel. This meant that ex-service personnel could receive a stable income earlier. The new scheme also would allow the commutation of a lump sum and was far simpler.

It is important to remember that the committee that actually made the recommendations relating to this was set up by a conservative government, it reported to a conservative government and that conservative government accepted many of its recommendations but in fact only gave its hasty response on the last day that it could before an election that it was expected to lose. The Labor government then came in, acted upon the recommendations—not all of them, but more of the recommendations of that independent committee set up by the conservatives—and then this government, and conservative governments ever since, and there have been a few, never acted to reverse it. It will not address what it says is a fundamental problem with what occurred at that time. So it really is not quite the way the legends have built it up and it does not really take into account what really occurred. Members of the coalition have been very happy to spread far and wide some of those urban legends, as the previous speaker did. That is why I seek to mention it today. It is a subject on which I will have more to say in the future.

Today I rise to speak particularly about issues relating to serving and former defence personnel and the Superannuation Legislation Amendment Bill 2007. The bill proposes a range of amendments to both the Australian government civilian superannuation scheme and the military superannuation scheme. Three provisions hold particular relevance for defence personnel and the ex-service community. Firstly, there is the provision from 1 January 2008 to allow for prospective restoration of previously cancelled spouse pensions. This applies to persons who had previously had their spouse pensions cancelled upon remarriage. Secondly, there is the provision to ensure that the entitlement to benefits in the Defence Force Retirement and Death Benefits Act 1973 scheme relating to post-retirement marriages is consistent with their treatment in the civilian schemes. Thirdly, there is the provision to address an anomaly in the treatment of the benefits payable in the DFRDB Act scheme upon marriage breakdown. These amendments are welcome but they do not go far enough.

I have been very concerned about defence superannuation over the last few months and the way in which the government seems to be operating under a veil of silence about the superannuation conditions of defence personnel. It is what is not in this bill that is relevant to defence superannuation and that particularly concerns Labor. There are a whole range of contemporary issues that need to be considered, particularly when set against the background of reforms to private sector superannuation that has occurred over the past 20 years.

What has been particularly alarming has been the government’s sluggish response to remedy the tax hike imposed by the Better Super reforms on Military Superannuation and Benefits Scheme members, who generally retire earlier, as a result of the new proportioning rule. People were left to wonder why the government was not acting when it was revealed on the military super website that some MSBS members, MSBS, would pay an increased tax on their partial commutation lump sum of up to 413 per cent. The government now says it will fix that, but when will this happen? I do not see such a guarantee in this bill. This is no small matter either. There are some 46,400 contributing members in the MSBS.

When Labor first raised this issue, it took several goes to prod the government into doing something about it. Initially, the government refused to guarantee that members of both the DFRDB Scheme and the MSBS would be protected from higher taxes imposed by the reforms. The government then protected DFRDB members from the tax increase but refused to explain why it did not extend that same protection to MSBS members. MSBS is the larger scheme, as I said, with more than 46,400 contributing members. Then the government refused to allow the military super review to consider the impact of the tax changes on defence superannuants.

Apart from the new proportioning rule, there are a whole range of other superannuation issues that concern defence personnel and the ex-service community. These include, but are not limited to, the indexation method for defence superannuation pensions; the appropriateness of the 10 per cent tax offset, in lieu of tax-free treatment upon reaching 60 years of age, under the Better Super reforms; the taxation treatment of non-super income for defence superannuants over 60; salary sacrifice arrangements for defence personnel; portability of super choice for defence personnel; outdated life tables used to calculate superannuation benefits; tax arrangements, including for those medically discharged who are in receipt of class A invalidity pensions and for those who fall under the compassionate or hardship provisions; and alignment between the preservation age of ADF members and the normal ADF compulsory retirement age.

We know that the minister has the report of the military superannuation review, which addresses a number of these issues. We also know it is likely that he has had the report since July. With an election just around the corner, what is the government doing? It is sitting on the report. The independent review, announced in February 2007, was to examine the suitability of current military superannuation arrangements in the DFRDB and MSBS in light of recent changes in the areas of superannuation and the Australian Defence Force.

Labor hopes that, in the absence of any action from the government, the review will provide crucial data regarding how these issues should be addressed and how military super can be improved. The proper consideration of these issues demands that the review be released immediately. Defence personnel and the ex-service community are entitled to know what the review says and what the government will do about it before the election. Are we going to see a repeat of what we saw with the McMahon government, when the response came only in the shadow of an election being called?

Labor’s second reading amendment reflects the range of concerns I have briefly outlined. However, let me quickly discuss two aspects of the bill: prospective pension restoration and reversionary benefits for post-retirement marriages. This bill will enable the prospective restoration of pensions for persons who have previously had their spouse pensions cancelled upon remarriage. By way of background, prior to 1977, under the Defence Force and Retirement Benefits Act 1948 and the DFRDB Act schemes, spouse pensions were cancelled on remarriage. This cancellation never applied to the Military Superannuation and Benefits Scheme. Spouses who remarried before these cancellation provisions on remarriage were removed from the DFRB Act and the DFRDB Act schemes in 1977 continued to be affected by the former provisions. From 1 January 2008 restrictions on the restoration of spouse pensions that were previously cancelled when a spouse remarried will be removed prospectively upon successful application. The changes will also apply to persons who have previously had their spouse pension only partially restored.

The bill also amends the DFRDB Act to improve access to reversionary benefits in circumstances where the retirement pensioner commences a marital relationship after age 60. Currently, a spouse’s pension under the DFRDB Act scheme is not payable if the pensioner, who commenced a marital relationship after age 60, dies within five years of the relationship commencing. The bill removes this restriction for post-retirement relationships. This change will provide consistency between the military schemes and the civilian schemes and is a positive measure supported by Labor. However, a pro rata rate of spouse pension will be payable where the relationship existed for less than three years immediately before the pensioner’s death. Where the resulting rate of pension is small, it may in some cases be commuted to a lump sum. I note that these amendments will likewise apply to the MSBS once the necessary changes are made to the MSBS trust deed and rules.

It is proposed that the new post-retirement marriage arrangements will commence on a day or days to be fixed by proclamation or six months after the act receives royal assent. However, for the sake of equity between the military and civilian schemes, Labor believes this should commence from the date it applied to the civilian schemes—1 July 2003. There was no satisfactory explanation given to the committee on why this did not happen. I understand that the parliamentary secretary has considered act of grace payments and that the number of persons affected by this would be very small—less than 10 a year—so the cost would be negligible. The government has been strangely silent on these issues. It has vacated the field. I know for a fact that veterans everywhere are expressing concern and anger over current indexation arrangements. I am receiving many emails every day about this issue. The level of concern within the veterans and defence community is high and is only building, due to frustration at the government’s neglect of them. The government is shutting its eyes in the hope that this will go away. Many of the matters I have raised today were canvassed at the Senate Finance and Public Administration Committee hearing on the bill. Sadly, few if any answers were received. Labor is particularly concerned that various actuarial and other modelling carried out by Treasury on a number of these matters has not been made public despite constant requests by our shadow minister, Senator Sherry, at many Senate committee hearings over many years. What is the government hiding? Why will it not be accountable to the public on this issue and why is it so scared of providing the necessary information for a full and frank debate?

The second reading amendment circulated in my name seeks to address some of the deficiencies in the bill that I have discussed today and calls on the government to do the right thing by defence personnel and ex-service members and to provide the data and reports necessary to hold informed and accountable policy debate on this important matter. Serving and former defence personnel deserve no less than a government that is accountable to them on their pay and conditions. 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:

(1)
in the case of military schemes the restoration of a reversionary benefit, so called widow’s pension to these schemes is not to apply from the same date as civilian schemes, 1 July 2003, but supports Labor’s calls on the Government to apply the same date;
(2)
there is no provision to remove the tax increase that applies to members of the MSBS as a consequence of the recent Better Super changes but supports Labor’s calls on the Government to remove the tax increase;
(3)
there is no provision to implement equality of treatment on reversionary benefits for interdependent couples, a promise made by the Government, but yet to be implemented;
(4)
there are a range of contemporary issues that need to be considered in the light of reforms to private sector superannuation over the last twenty years, including;
(a)
indexation provision of pension entitlements;
(b)
interdependent relationship reversionary pension;
(c)
the tax increase that members of the MSBS will suffer as a consequence of the 1 July Better Super changes;
(d)
salary sacrifice provision for the public sector;
(e)
full portability for the public sector;
(f)
the value of the 10% rebate for untaxed schemes and income tax treatment of non-super income at age 60 and tax treatment of foreign defined benefit schemes such as Australian staff working for the United Nations, again consequences of the 1 July Better Super changes;
(g)
transition to retirement provisions; and
(h)
tax treatment for class A military invalidity pensioners.
(5)
Treasury has a range of studies, modelling and reports on issues listed above that at the direction of government, despite numerous requests at Senate Estimates it refuses to release and is keeping secret, and supports Labor’s calls on all these to be released publicly”.

I commend the amendment to the House.

Photo of Bruce ScottBruce Scott (Maranoa, National Party) Share this | | Hansard source

Is the amendment seconded?

Photo of Jill HallJill Hall (Shortland, Australian Labor Party) Share this | | Hansard source

I second the amendment.

Photo of Ian CausleyIan Causley (Page, Deputy-Speaker) Share this | | Hansard source

The original question was that this bill be now read a second time. To this the honourable member for Bruce 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.

10:46 am

Photo of Gary NairnGary Nairn (Eden-Monaro, Liberal Party, Special Minister of State) Share this | | Hansard source

In summing up this debate on behalf of the Minister for Finance and Administration, I will say that the Superannuation Legislation Amendment Bill 2007 makes a number of enhancements to the Australian government’s civilian and military superannuation schemes. The bill removes, from 1 July 2008, the requirement for contributory members of the Commonwealth Superannuation Scheme, the CSS, to make member contributions to the scheme. As a result, member contributions will become voluntary. This will provide members with the same flexibility and incentives to contribute to superannuation that are available to the broader community.

The bill also allows, from 1 July 2008, eligible members of the PSS to elect to leave the PSS and join another superannuation arrangement for the payment of future contributions. A member’s eligibility to join another superannuation arrangement will be determined by the choice arrangements that their employer has in place.

From 1 January 2008, the bill will enable members of the CSS to obtain early release of their funded account balances on severe financial hardship and compassionate grounds to the extent allowed under the superannuation regulatory framework.

The bill will also facilitate, from 1 January 2008, the prospective restoration of pensions for persons whose spouse pensions, provided under certain closed Australian government civilian and military superannuation schemes, were cancelled upon remarriage. Upon valid application, spouse pensions cancelled upon remarriage—prior to 1976 in the civilian scheme and prior to 1977 in military scheme—will be prospectively reinstated.

Changes to the CSS as a consequence of the government’s Better Super reforms are also included in the bill. The main amendment will ensure the continued payment of employer productivity contributions where a member has not provided their tax file number. This is consistent with the arrangements in the broader community, where employer contributions would still be payable even though the member has not provided their tax file number. The other amendments are technical and take account of the payment of amounts from the CSS fund in relation to release authorities issued by the Commissioner of Taxation and to reflect changed superannuation terminology.

The bill also ensures that the entitlement to benefits in the military superannuation schemes relating to postretirement marriages is consistent with the treatment in the civilian schemes. The bill also addresses an anomaly in the family law provisions of the Defence Force Retirement and Death Benefits Act 1973 to allow family law orders to be applied as intended. I commend the bill to the House.

Question agreed to.

Original question agreed to.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.

Ordered that the bill be reported to the House without amendment.