Thursday, 4 April 2019
Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 2) Bill 2017; Second Reading
I present a revised explanatory memorandum to the bill and I move:
That this bill be now read a second time.
This bill amends the Corporations Act 2001, the Superannuation Industry (Supervision) Act 1993 and the Financial Sector (Collection of Data) Act 2001 to strengthen the transparency and accountability of super funds and improve outcomes for members. The government believes Australia's compulsory superannuation system must be transparent, accountable and well regulated, prioritising outcomes for members, not shareholders, directors or employees, or trade unions. I'm confident the measures in this bill will achieve these outcomes.
Super is an important financial asset—for most Australian households, their largest financial asset and their second-biggest asset after the family home. That's why we need to make sure we've got the foundations right. The powers of the regulators and the obligations of trustees and directors must measure up to contemporary standards. That's why the measures in the bill are essential and why they need to be passed.
Many of the measures in the bill have been on the policy agenda for several years and have been recommended by past reviews into super, including most recently by the Productivity Commission, which labelled them a policy must-have. The bill contains new measures to modernise the super system and reintroduces the portfolio handling disclosure measures. It implements two of the recommendations of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry relating to super. It will improve the quality of super products by introducing a new requirement for trustees to consider the appropriateness of their MySuper and choice products via a new outcome assessment.
The bill strengthens the Australian Prudential Regulation Authority's powers in a number of key areas. The enhanced directions power will ensure that the regulator has the ability to quickly intervene to protect the interests of members, including by directing trustees to take specific actions, such as transferring, merging or winding up a fund. The bill also strengthens the powers of the regulator by requiring approval to be obtained before a change in ownership or control of a trustee takes place by introducing civil and criminal penalties for trustees and directors who break their obligations and by enhancing the authorisation process for MySuper products.
The government expects the regulator to use these powers to safeguard the interests of members, including to more effectively address fund underperformance. Finally, it will improve transparency by introducing a requirement for trustees to hold annual members' meetings by enabling the Australian Prudential Regulatory Authority to obtain more detailed data on super fund expenses and by introducing workable arrangements for portfolio holding disclosures. The performance of the super system has a direct bearing on the retirement incomes of each and every Australian. Confidence in the system is obtained by ensuring members can see where their funds are being invested and see super trustees who are complying with the law.
It's also important to recognise that, in passing this bill, we are legislating two recommendations of the royal commission. This is within nine weeks of the government receiving the final report. It's only this government, frankly, that can be trusted to take action on all 76 recommendations, and the passing of this bill is yet another example of the government continuing to reform the financial sector in a way that delivers better outcomes for members of superannuation funds. It's only this government that is putting members' interest first and it's focusing on ensuring Australia's super system delivers outcomes for all Australians first and foremost, not for any self-interest in the industry—that is, a system that encourages people to participate actively; that ensures transparency to facilitate informed decisions; that gives people the confidence to invest; that is a strong regulator; and that is equipped to protect members interests and, when required, to hold funds to account. I'm confident the measures in the bill will achieve these outcomes. Full details of the measures are contained in the explanatory memorandum. I present a signed, revised explanatory memorandum.
It's a great pleasure to speak on behalf of Labor members in parliament about the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2019. It's a bit of a dry name for the bill, but it's a bill that does something that's actually incredibly important and which is going to make big improvements to the superannuation savings of Australians. I'm particularly pleased to speak on this bill because Labor was able to take the opportunity in the other place to make enormous improvements to this bill. The bill as it was originally drafted was actually going to leave very large segments of the Australian superannuation market out of these additional accountability measures. Labor has been pleased to fix that problem.
Before I get into the content of the bill though, I need to respond to a little bit of the rhetoric that was coming at us from the minister on the other side of the House. To now hear the government saying that they're the ones that can be trusted to implement the royal commission recommendation is laughable. That is laughable. It was April Fools' Day on Monday. It's Thursday today, and we can't take jokes like that in the House of Representatives. The idea that this government has any moral authority over financial services reform in this country is a complete and utter joke. They did everything they could to avoid calling a royal commission into the big banks. They did everything they could to protect them from proper laws and proper accountability. Indeed, while Labor spent almost two years arguing for that royal commission, the government put its political capital into trying to give $17 billion to the big banks, who we now know were anything but deserving of a big tax cut. So to have the minister come into the chamber and say that they can be trusted on banking—come on, that's just ridiculous!
It's not just up to the point of the royal commission but in the response to the royal commission that we see the government doing everything they can to use weasel words and clever political language to try to get out of implementing the recommendations. In fact they're using this in what they probably think is a clever way, saying that they're going to take action on the 76 recommendations of the royal commission. The reason they're using that language is they're not going to implement them; they're just going to do something, a little bit, about some of those problems. In fact, in large part, the government has said that they'll think about the things that Commissioner Hayne recommended later—they'll do a review in a few years; they might go one-tenth of the way towards doing what Commissioner Hayne recommended. Can I say that I'm so disappointed to hear the minister come in here and put forward the very false premise that the government has any authority to talk about these issues in that way.
The bill before the House is a very good example. In fact, it's the second day in a row in this parliament where I've got up on a bill where Labor has been behind pushing the government further to make those laws good laws and where it's Labor that's been behind bringing in the royal commission recommendations into the laws, which the government's been saying that it can't implement. The minister's right: we've had nine weeks since the royal commission reported. If the parliament had actually been sitting during that time, we could have made real headway on putting some of those recommendations into law. But, instead, here we are with the government flapping around. It doesn't want the parliament to sit because it knows it has to have terrible things called 'Liberal Party caucus meetings' where all they do is yell at each other rather than address the problems facing the country. It's a bit of a joke, but I don't think I really need to point that out.
Returning to the subject of the discussion today, which is about the member outcomes test, I mentioned that the original bill didn't actually do what we thought it needed to do, which is apply more accountability to a broad range of superannuation funds and accounts that Australians are in. The major feature of this bill is the member outcomes test, which would require trustees to assess on an annual basis whether the outcomes that have been delivered by their products are promoting the financial interests of the members. It's a pretty straightforward thing. In fact, I think it's interesting that we weren't already doing it. It's a significant reform, and it's one that Labor in principle would always have supported.
There were very significant issues, though, with the way that this bill was originally drafted. The biggest issue was that it applied only to MySuper products. Superannuation's quite complicated but anyone who is paying even a little bit of attention knows that the biggest issues in superannuation are actually not in MySuper; they are choice products. Here we had the government putting forward a bill that would have taken what is the best-performing part of this sector and introduced more accountability to that part, but the really troubling aspect of the sector was going to be left untouched. It's unfortunately a pretty regular narrative that we see when the government comes in and tries to make changes to superannuation. The changes, as the government had drafted them, would have largely exempted about 83 per cent of the bank-owned and other retail superannuation assets, and that is despite the fact that choice products are consistently delivering poorer returns to members than MySuper products. I should make it really clear that that's not to say that there are no issues with MySuper products—there are. But to leave the choice products out of the outcomes test was not going to fly with the Labor Party.
Labor is the architect of Australia's compulsory superannuation system, and that's why we'll always fight for stronger laws to strengthen, improve and protect this sector. There's a lot of really good debate about how we should be regulating financial services and, particularly, how much we should allow consumers to make their own decisions and, in some cases, their own mistakes. Superannuation has a number of very distinctive features which mean the parliament has to play a greater role in making sure that Australians are protected. For one thing, it's compulsory. This parliament actually legislates to force people to put aside part of their income each year for their retirement. So we're requiring people to save. We also know that people tend not to pay a great deal of attention to their superannuation. You only have to look at the number of Australians who have multiple superannuation accounts, up until even their forties and fifties, to see that people are not taking such an active interest in their super until those final years before they get into retirement. The other thing is that it's actually just very complicated. So, for those three reasons, it's really important that the parliament comes in, makes really good laws and makes sure that Australians are properly protected.
What came out of the Hayne royal commission sickened me and it sickened Labor members of parliament. It was just devastating to see the way that financial services firms and superannuation firms, in some instances, really abuse the trust that Australians put in them. It was a royal commission, as I said, that the government voted against 26 times—a royal commission that they never wanted to happen—and it's very clear that they don't actually want to implement the recommendations.
We were also very concerned about the findings that the Productivity Commission inquiry into superannuation made earlier this year. That really told us, for the first time, what the impact is of an Australian falling into a not-very-well-performing superannuation fund. The Productivity Commission showed us that, if someone comes into a fund at the top quartile—one of the highest-performing funds in Australia—at the beginning of their career, they are going to be somewhere in the order of $500,000 better off in their retirement than they would be if they'd been defaulted into a poor-performing fund. What is so outrageous is that, for a lot of people, whether they end up in a high-performing fund or a low-performing fund at the beginning of their career, it just comes down to luck. So right now this parliament has a compulsory savings scheme that allows people, really through a lottery, to end up in a high- or low-performing fund, and the impact on that person is half a million dollars when they retire—a very significant impact on the standard of living of a retiree. So it's absolutely clear that the parliament needs to take significant action on this question, and the member outcomes test is part of helping us do that.
Labor has one primary priority for superannuation, and that is protecting members' interests. What that means is that we need to get as many Australians into high-performing superannuation funds as we can. Labor's amendments to this bill in the Senate will force choice superannuation funds to report on their performance for the first time, like MySuper products. They go beyond what was in the government's initial bill and beyond the government's amendments. We were very pleased to see them get crossbench support in the other place.
This bill, as amended, will shine a light on underperformance and ensure that we have tough benchmarking of high and low performance. We don't want to let under-performers continue to be left alone in the dark with our money, as we saw in the royal commission. Labor's amendments successfully passed the Senate. They will also allow us to crack down on dodgy directors of super funds and trustees by significantly increasing penalties for misconduct to more than $500,000.
Labor also moved amendments to schedule 5 to strengthen APRA's directions power so that it can extend it to related parties. Many superannuation fund trustees delegate the operation of the fund to related parties. That's why that was such an important measure. If the directions power did not apply to related parties, APRA would need to rely on contractual rights—which, in some instances, wouldn't have even existed—to ensure that actions that the related party needs to take, in APRA's view, would be done. Those amendments are important additions to APRA's powers.
The biggest problem facing Australian superannuation today is poor-performing funds and the many millions who are defaulted into them each year or who are stuck in them. If elected, Labor will act to address this issue. We can't stand by while millions of Australians have their savings eaten up by poor performance or fee-gouging. Labor is proud to have strengthened this bill to crack down on these funds and hopefully ensure a better retirement for the many Australians stuck in them. There are big issues in our superannuation system. The government has had almost six years to address them but has failed to take action. There is unpaid superannuation, which the best evidence we have tells us is actually a bigger problem in this country than wage theft. There is the superannuation gender gap. Australian women are retiring with roughly half as much in their retirement accounts as men. We just can't continue like that. There are chronic under-performing funds and dodgy funds that are misusing workers' money and ripping off people in retirement.
We want to make sure that superannuation is working better for all Australians. And that's why, if elected, Labor will introduce a raft of measures that will work towards closing the superannuation gender pay gap. This includes paying superannuation for the first time on Commonwealth paid parental leave and dad and partner payments, because it's just wrong that someone who takes time out of work to look after children essentially pays this enormous financial penalty later in their life for doing so.
Labor also has a plan to address the enormous issue of unpaid superannuation. That includes placing the right to superannuation within the National Employment Standards, strengthening the ATO compliance regime and increasing penalties for employers for underpayment or non-payment of superannuation. And Labor will take significant steps to lift the performance of funds. Standing up for ordinary people is the core mission of our political party. We're very proud to have created superannuation with our friends in the union movement. And we're very proud of what it's come to today—almost $3 trillion in savings, which provides huge economic benefits to us more broadly and, most importantly, provides a more comfortable retirement for millions of Australians. But this system relies on public trust, and we need to do a bit of work, I think, to restore that public trust so that we can make sure that millions more people benefit from it in the future. Thank you.
I rise to speak in support of this bill. The Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2019 includes eight changes to superannuation governance arrangements, including transparency measures, new powers for APRA to regulate superannuation licensees, and new penalties for directors. As the shadow minister has just outlined, Labor was successful in moving some amendments to this bill in the Senate which improved the operation of the bill and, most importantly, extend its coverage. Those amendments were drafted by the shadow minister, importantly in consultation with the industry. We listened to the feedback that we'd got from people who work within this industry about the shortcomings of this bill and we moved to rectify those. In doing so, we've been able to improve the coverage of the bill.
In terms of the government's amendments requiring registrable superannuation entity licensees to look through pooled superannuation trusts to meet their obligations to make information about their portfolio holdings publicly available, that's a reform that Labor certainly supports and that will improve transparency and governance of super funds, and clarifying that the obligations on RSE licensees apply equally in respect of all choice products and MySuper products is of course something that Labor supports and wants included in this reform.
The issues that Labor has been concerned about predominantly relate to ensuring that choice products that contain multiple investment options are required to disclose portfolio holdings. This is because the disclosure requirements only extended to investment options held or issued by the RSE or related entities, so retail funds which offer their investment options via custodial arrangements may not have met the requirements. Labor, in consultation with the industry, raised these concerns that the changes didn't apply to choice products and were largely exempting around 83 per cent of bank-owned and other retail superannuation assets, and Labor's amendments have ensured that the annual MySuper outcomes assessment gives priority to net return to members, that provisions of the bill cover choice products as well as MySuper products, that APRA is given the same powers in granting and cancelling an RSE licence as it will have for MySuper authority, that APRA's direction powers extend to connected entities, and that it's clear in the bill that the portfolio holdings disclosure requirements cover choice products with multiple investment options.
Unfortunately, the government's original amendments basically implied that bad member outcomes were confined to MySuper products. We all know that's not the case. Regular surveys and assessments of the performance of funds across the industry, retail and self-managed sectors indicate that some of the best-performing funds, in terms of not only the investment outcomes for members but also the transparency associated with fees and charges, are delivered by industry funds, and many of those are MySuper products. Our amendments force choice superannuation funds to report their performance, like those MySuper products do.
We all know, unfortunately, that millions of Australians are being ripped off by underperforming accounts. It's critical that they are forced to report their performance and lift their game. We've seen, not only through the banking royal commission but also through the recent Productivity Commission report, just what a difference an underperforming account can make to a member's balance when they retire. The shadow minister pointed out earlier that, if someone, through no fault of their own, is defaulted into a badly performing fund, as compared to a high-performing fund, the difference at the end of their working life can literally be close to millions of dollars. When most people enter into the superannuation regime, they're defaulted into a particular product, because—let's face it—they're not aware of how the superannuation system operates. When you're talking about teenagers and people in their early 20s, they don't have the financial literacy to understand how the system works, and a lot of the time they start in a particular occupation and are defaulted into a particular fund.
It's important to ensure, when that does occur, that those that are in that situation can have trust in the operation of that fund—that the trustees are operating in the best interests of their members and ultimately trying to maximise the performance of the fund. Labor's technical amendments will significantly strengthen that outcomes test. We need to see penalties for dodgy directors increased to more than $500,000 to make the penalties effective but also to ensure that they're retrospective to October 2015. Labor will also seek to strengthen APRA's directions power and increase super funds' portfolio-holding obligations.
We all know that Labor built the superannuation system—it's something that we're very, very proud of—and we're always working and consulting with the industry to improve it. Where sensible amendments are offered by the government we will seek to support them, but in this case we've also been able to improve the regime and the amendments that have been put forward by the government. The financial services royal commission demonstrated that there needs to be much more scrutiny, much more accountability and much more transparency when it comes to the provision of financial services in this country. That not only applies to the advice industry, it not only applies to the insurance industry or the banking industry—particularly in areas associated with mortgages and loans—but it also applies to superannuation. Progress in improving transparency, accountability and better outcomes, including in superannuation, is something that Labor wholeheartedly supports.
There are serious issues in superannuation that still need to be dealt with. The government have had six years to try and deal with some of those issues and they've abjectly failed. The notion that people can have unpaid superannuation in this day and age is simply criminal and it amounts to wages theft. Given the technical nature of payments platforms for people and the fact that everyone in the workforce has a tax file number, we should be able to make sure that, if someone is working in a particular industry, in a particular occupation, they are paid superannuation in accordance with the legislation and on time, yet it's not the case. It's something that this government have been woefully inadequate in dealing with.
The superannuation gender pay gap is a serious issue that still results in a major disadvantage, predominantly for women in Australia, as a result of them taking breaks from the workforce. It's an issue on which Labor has sought the advice of experts who work in this industry and is acting on it. If Labor is elected, we will seek to rectify the gender pay gap that exists in superannuation in this country through reforms such as ensuring that superannuation continues to be paid when someone goes onto paid parental leave or dad and partner pay. Underperforming funds are a serious issue. We know the outcomes of underperforming funds for people during their life cycle can be rather detrimental and put people at a severe disadvantage compared to those in more superior-performing funds. This reform goes some of the way, but there will be more work to do, and Labor stands ready to do that work if we're elected at the next election.
Labor are very proud that we forced this government into agreeing to a royal commission, despite the fact that they voted against it 26 times and despite the fact that they did not want to shine a light on what's been going on in financial services and banking in this country over the last decade. Labor are extremely proud that we were able to achieve that outcome and force this government into a royal commission. Labor have been vindicated. The findings of that royal commission and the shocking evidence that was given through that process vindicated Labor's call for a royal commission. Labor have stood ready to implement the recommendations from that royal commission as quickly as possible. We even offered for the parliament to sit an additional two weeks in March this year to ensure that we had the time to implement the more urgent recommendations that related to issues like grandfathered commissions, which have been the root cause of a lot of the problems in this industry. Unfortunately, the government again delayed, obfuscated and wouldn't deal with the issue. It perfectly highlights their approach to financial services, to superannuation, to advice and to what's been going on in banking and financial services over the course of the last decade, and it's a great shame. If Labor is elected at the next election we will make sure that we as quickly as possible get on with the job of implementing those royal commission recommendations through our implementation taskforce, in consultation with the industry, to improve the regulation that exists in this area and, importantly, to improve outcomes for people in financial services in this country, including superannuation.
Today we are debating legislation, the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2019, to tighten up the administration and regulation of our superannuation industry. This stands in contrast to decisions that have been made by this government. A year or so ago we had a decision that reduced the penalty rates payable to workers on Sundays and public holidays. It reduced the take-home pay for many of our lowest-paid working Australians. Labor said to the government and to the Australian people, 'We can fix this.' We proposed legislation to resolve this issue, and the government said no. The government said no because it said, 'Well, that was the decision of an independent tribunal. We should not legislate around that problem.' In doing that, the government not only showed its hypocrisy—hypocrisy because it was exactly the opposite of what it said when it came to the issue of safe rates, an issue that it was so opposed to that not only did it reverse the decision of the tribunal in that matter but it abolished the entire tribunal—but it's also entirely contrary to the way in which we saw the superannuation system develop in this country. In the case of our superannuation system, we saw a case brought in the commission to expand superannuation so that it applied to all working Australians. The commission declined to make that decision and the parliament, as the sovereign body of this nation, said, 'We can resolve this through legislation.' The parliament went and legislated to create a compulsory superannuation system in this country. In that regard it stands in stark contrast to the position adopted by this government when it comes to the issue of penalty rates. The issue is wholly competent and wholly possible for this parliament to resolve, and indeed it should do so. If there is a Bill Shorten government after the next election this parliament will legislate to fix the penalty rates issue.
Today, in highlighting that stark contrast, we are dealing with legislation to further tighten up and improve our superannuation system in Australia. This bill, which deals with the accountability and outcomes of superannuation, is vitally important, because, through the creation of our universal superannuation system here in this country, we have created and developed one of the largest bodies of savings in the world. It is important for every working Australian that their money, the money that is looked after by superannuation trustees, is properly governed and that they can have confidence that the money they are contributing to superannuation, whether through the superannuation guarantee or through a voluntary contribution, will not only be there in the future for them to rely on but will be protected against bad governance and bad investment decisions. It also provides an opportunity for Australians to be in a fund that will actually provide good returns for them.
The way in which this legislation was introduced into this parliament highlights the way in which the coalition government really isn't committed to superannuation for ordinary working Australians. I say that because when you look at what this bill is targeted at, in a sense what it is doing is making life harder for trustees administering the MySuper-style accounts of most ordinary Australians, but it is not imposing those regulations on many of the retail funds and choice funds out there. The curiousness of that is this: who does that then provide a benefit for? It certainly doesn't protect the people who have put their money into types of superannuation accounts other than MySuper. What it does is to make life easier for the banks and other superannuation funds to make a profit from the money that is being put into those superannuation accounts. It lets them off the hook while trying to apply proper scrutiny of MySuper. There is no criticism of that. Why on earth would you let those others off the hook?
It reflects the priorities of this government. It is the priorities of this government that have delivered proposed massive tax cuts for the big end of town but then they don't look after ordinary working Australians. It is these perverse priorities from this government that led to the initial bill that we saw here.
Fortunately, the government has seen the light, because of the pressure applied by our shadow minister for financial services, in seeing that this legislation had to be amended. The Senate facilitated that occurring through a range of government and opposition supported amendments going through the Senate. What the bill, as a whole, was trying to do is very important. It is very important to make sure that we see that APRA, as the prudential regulator overseeing one of the biggest bodies of savings in the world, it not at risk, because, when you create a body of savings like that it is a honey pot. People see that as an opportunity to make their own money. We need to make sure that that money is available for the people who need to rely on it in their retirement.
We have now made sure that a lot of the additional regulation that was going to apply just to MySuper accounts or just to trustees managing MySuper products will now apply more generally to retail funds across the board so that we have these protections protecting all superannuation accounts. There are also the protections around outcomes and reporting on those things and making sure that the technical amendments mean that the outcome tests that will be applied will actually be appropriate and will actually deliver on the outcomes. We've made sure that there will be good penalties applied to the directors of these trustees, so that they have to take responsibility for the things that they do as directors of trustees of superannuation funds. They are placed with a huge burden of responsibility.
When we look at what's happened, in particular, in retail funds—the returns that are being provided, the lack of transparency that has existed in relation to those returns and the fees that are baked into those lower returns—it is quite clear that people have effectively been ripped off in Australia in relation to some of these superannuation funds. That, fundamentally, is unfair on them. It is unfair on them but it is also unfair on the Australian taxpayer. When people are getting lower returns, when people end up having up to $100,000 less in their retirement savings because of being gauged on fees or having substantially lower returns because of the fees baked into those funds, it means that they are more likely to end up on the pension scheme sooner and it means that they are then going to have to draw on taxpayer funds in that regard. It is good that we have a pension scheme that operates there as a safety net—absolutely—but it shouldn't have to kick in because of bad management and bad investment decisions by retail funds. So, having those outcome tests, making sure that directors are responsible for meeting the best interests of superannuants and holding those directors to account for that, is very, very important.
It will join with a suite of other matters that Labor wishes to introduce when it comes to superannuation. I have been having a long-running correspondence discussion, we might call it, with the Commissioner of Taxation. It results from a constituent of mine whose employer had not been paying his superannuation. His employer closed up business and left his superannuation account deficient of funds. The ATO has been pursuing this person, the employer, for a whole range of unpaid taxes, including the superannuation guarantee payments. It is good that the ATO does that. Interestingly, there is nothing that my constituent can do to try and force those funds out of his former employer. Also, there is nothing that my constituent can do to find out when he can expect those superannuation funds to be paid, even though the former employer has entered into a payment arrangement with the ATO. I raised this with the commissioner and said, 'Why can't you tell him?' and I was told that it is because of the privacy provisions in the tax act. I said, 'That's curious because the privacy provisions in the tax act say that you can't disclose matters that don't relate to the person seeking the information.' But obviously it is his money. It is his superannuation account that the money is going into. Those matters directly relate to him.
My beef fundamentally may well be with the operation of those privacy provisions, but what it also points out is that there is a fundamental lacking in the way in which ordinary working Australians can go about enforcing what is effectively an employment right, which is to be paid their full remuneration when they get their weekly, fortnightly or monthly pay packet and for that money to end up in their superannuation account. That's why it is so crucial to—and this is why Labor has adopted this policy going into this election—make those superannuation guarantee payments part of the National Employment Standards, something that can be enforced directly against the employer, something that can make sure that employees can get the funds to which they are entitled. It is about creating savings for taxpayers. It is about that way which we have created in Australia where people can look after their own retirement better by having superannuation accessible and available at their disposal.
With that I bring it back to the fundamental point that I raised at the beginning—Labor were the architect of our superannuation system here in Australia. We were the architect of it because, despite the Industrial Relations Commission saying, 'We're not going to make an order; we are not going to create an award that puts this into our employment system,' Labor in government said: 'We hear what you are saying, Commission, but we are going to legislate it anyway. We are going to introduce a system that will create one of the largest bodies of savings in the world and put Australians in a better place to manage and fund their own retirement.' We made those decisions and do you know what? Every time we have taken a decision like that to the benefit of working Australians in this country, the Liberal Party and the National Party, the members of the coalition, have opposed it. The only time they ever do anything that might even look vaguely like it is going to be in support of that system, it is a mechanism to avoid the superannuation system. It is a mechanism of making sure that a body of people that already are clearly wealthy enough to look after themselves can save even more tax dollars through the system, creating another loophole. They've never been about making sure that this system works for the vast majority of Australians.
You can see it in the way this bill was drafted originally. Yes, they went after MySuper—good. That's excellent. But they left open the minefield when it came to all the other superannuation funds—not because they saw that the highest risk was in MySuper but because it would benefit their friends at the top end of town in the banks that were managing all of these superannuation accounts. Why should extra scrutiny be applied to them? Well, I can't think! Have there been any other criticisms of the banks and the managers of these retail funds over the last year or so? Let me have a think about that. Oh, there was that royal commission that they opposed 26 times! Twenty-six times they opposed a royal commission. The royal commission made recommendations of things that should be changed. If it weren't for the pressure that was applied by Labor to make sure that these sorts of changes were applied across the board and we had those amendments made in the Senate, we wouldn't be able to stand here today and provide the support for this legislation in the way that we do now.
It is good that we have this legislation before us. As I say, we support it. But, fundamentally, what we on the Labor side of this parliament do here is support the superannuation system providing better retirement incomes and support for ordinary working Australians. We want to make sure—and that's why it was important that the scope of this legislation was expanded and why we will take this further in government if we are successful at the next election—there are the proper administration and regulatory supports around this huge body of savings. As I said before, it acts as a honey pot. It acts as a way in which people can say: 'I can make a fee out of that. I can make a profit out of that. I can get an aspect of that.' We have seen it with property developers trying to get people to put their superannuation funds into apartments. We have seen it with the fees being gouged out of certain retail funds. We have seen it in the low returns over many superannuation accounts that are available to people in Australia. Clearly there is a problem when it comes to the nature of competition in this sector if we have so many different accounts returning so many suboptimal returns for Australia's future retirees. That bodes a fundamental problem.
That's why it is important that we have this legislation apply in a much broader way. It is good that the government got around to seeing these amendments come to fruition through the Senate. As I say, Labor will make sure that people's retirement incomes are protected by making sure that their right to their superannuation guarantee payment is part of the National Employment Standards. I look forward to the day, Mr Deputy Speaker, as I suspect you do too, that a Labor government, hopefully in just a few months, will be able to start bringing about those changes as well.
I thank all those who have made a contribution to the debate. The super industry is a $2.7 trillion industry and it is critical that the system is modern and solely focused on delivering outcomes for members. A modern super system empowers members and provides for transparency around fund activities and performance. Many of the measures in the bill will be on the policy agenda for several years and have been recommended by past reviews into super—including, most recently, by the Productivity Commission, which labelled them 'a policy must-have'.
The bill implements two critical recommendations into the royal commission into misconduct in the banking and financial services industry. The measures in this bill will strengthen the regulator's power and improve accountability, transparency and, ultimately, member outcomes. This will boost members' confidence that their money is being managed in their best interests. The government wants a super system that delivers outcomes for the benefits of members—not shareholders, directors, employers or trade unions. I am confident the measures in the bill will achieve these outcomes.
Schedule 1 creates a requirement for both MySuper and choice products to consider the appropriateness of their product on an annual process via the new outcomes test. It also creates an obligation on all trustees to promote the financial interests of members. This will boost the accountability of trustees and ensure that the outcomes delivered to members are in their best interests.
Schedule 2 gives APRA more scope to cancel an application or cancel a MySuper application where it believes the trustee will not comply with the obligations. This will improve the quality of default MySuper products by allowing APRA to refuse or cancel an authority to offer a MySuper product if it has a reason to believe the trustee may fail to comply with its obligations.
Schedule 3 of the bill delivers on both a recommendation of the financial system inquiry the government accepted in 2015 and a recommendation of the royal commission into misconduct in the banking, super and financial services industry. It will strengthen the accountability of trustees and directors by making them subject to civil and criminal penalties for breaches of their duties.
Schedule 4 gives APRA the power to reject a change in the ownership of a corporate trustee. Given the potentially detrimental outcomes that may arise from the mismanagement of funds, we believe that no-one should be able to own or control a super fund without APRA's approval.
A strong regulator is crucial for ensuring confidence in the super system, and schedule 5 of the bill will ensure this. The new directions power will harmonise APRA's directions powers across credit unions, friendly societies and the banking, insurance and super industries. This will enable APRA to intervene at an early stage to address prudential concerns in a manner that ensures the required actions are in the best interests of members. It will enhance APRA's powers to issue directions to a trustee, or its connected entity, to take, or refrain from taking, specific action.
Schedule 6 of the bill introduces a workable arrangement for portfolio holding disclosures. It will boost transparency for members and will also ensure that Australia's system is consistent with international best practice. The approach in the bill will significantly reduce the complexity of the current law, which was introduced in 2012 but has never commenced operation.
Schedule 7 improves transparency by introducing a requirement for super funds to hold annual members' meetings. This will give members the ability to hold trustees accountable for the operation and performance of their funds.
Schedule 8 enables APRA and fund members to gain a more complete understanding of how funds are spending members' moneys, and whether this is in the best interest of members, via a new reporting standard.
Importantly, schedule 9 includes a measures to implement another recommendation of the royal commission around incentivising employers. The measure will strengthen the effectiveness of the prohibition of inducements to employers by trustees and allow civil and criminal penalties to be imposed on trustees that use goods or services to induce employers.
We consulted with stakeholders in the development of this legislation. Dozens of written submissions were received from industry and individuals on the draft legislation, and over 20 organisations participated in multiple roundtables. There was strong support for the policy intent of the bill. I would like to thank all those who contributed to the design of the bill. Once again, we make it very clear that the government is focused on ensuring Australia's super system delivers outcomes for all Australians first and foremost, not for any self-interest in the industry. I am confident the measures in this bill will achieve these outcomes. I commend the bill to the House.
Bill read a second time.