Andrew Murray (WA, Australian Democrats) Share this | Hansard source

Thank you. The Superannuation Legislation Amendment (Trustee Board and Other Measures) Bill 2006 contains two schedules which implement a number of recommendations of the Review of corporate governance of statutory authorities and office holders, otherwise known as the Uhrig report. Specifically, the intent behind this bill is to consolidate the governance arrangements for civilian public sector employee superannuation schemes. This includes funds managed through the Commonwealth Superannuation Scheme and controlled by the CSS board, funds managed through the Public Sector Superannuation Scheme and controlled by the PSS board and funds managed through the Public Sector Accumulation Plan that is also controlled by the PSS board. As the Bills Digest correctly says in its concluding comments:

The main provisions of the bill will lead to streamlined administration of the Commonwealth’s civilian superannuation schemes. As the intention of the bill is for these schemes’ assets to continue to be managed separately, in the light of the unique characteristics of each scheme, there will be little impact upon the members’ account balances.

The bill proposes abolishing the CSS board and incorporating the trusteeship of the CSS into the PSS board, which also governs the PSSAP, and renaming the single entity as the Australian Reward Investment Alliance. Additionally, the bill proposes increasing the number of directors on the PSS board by two to seven, with the two new positions to be filled by the remaining two CSS board members not already represented on the PSS board.

As I have stated, the provisions in this bill are in response to the recommendations of the Uhrig report, which, among other things, recommended increasing the number of directors on public boards to between six and nine members and the establishment of a single board for the CSS, PSS and PSSAP. These proposals require a number of changes to legislation, consequential and otherwise, including amendments to the Superannuation Acts 1976, 1990 and 2005 and amendments to the Superannuation Legislation Amendment (Superannuation Safety and Other Measures) Bill 2005.

The amendments contained in this bill should be supported as a step in the right direction towards better governance standards. However, the step can also be described as a shuffle, for in reality these changes do little more than streamline some of the bureaucratic structures seen throughout the civil service, rather than implement new, improved or innovative changes in corporate governance. While I agree that a single board should rightly oversee the activities of the CSS, PSS and PSSAP, to all intents and purposes this is already the case, since all five members of the CSS board are also members of the PSS and PSSAP boards. Moreover, all three funds also share the same chief executive officer. In fact, the only discernible difference is that the CSS board has an additional two members, and this bill proposes that those two members be included in the unitary board for all three funds. Thus, a more accurate description of the government’s proposed advancement of governance ideals is the inclusion of an additional two board members on the PSS board—a provision already in place for the CSS board. Is that an achievement? I suppose it is.

Will this change make any material difference to the present governance of the three funds? I doubt it. The Democrats and I have long sought to implement real and effective change in the governance principles for public boards. One such example is my proposal for specific principles and criteria for appointments to public boards, authorities and agencies. In stark contrast to the government’s, these proposals are examples of tangible governance improvements. They address pressing issues of independence and appointments on merit and, if implemented, they would undoubtedly improve the governance standards of public boards as they currently exist.

An area that this bill does address is a streamlining of the two governance boards. On this basis there are obvious efficiency gains, since both boards share the same membership but have separate costs. I wonder, though, how this new single board structure will manage the legal discrepancies and inconsistencies that currently exist between each fund. One such inconsistency is the varied treatment of same-sex partnership rights and obligations for each fund. Will board members be able to put their PSSAP hat on and say, ‘Hold on; that’s sexual discrimination,’ and then put their CSS or PSS hat on and say, ‘Homosexuals shouldn’t receive the same superannuation rights as heterosexuals’? Discrepancies such as this do exist between each fund. For example, consider the ridiculous state of affairs that exists for public sector employees who are members of the PSSAP. According to correspondence received from Senator Minchin, all new employees who commenced employment on or after 1 July 2005 who are members of the scheme and who are in a same-sex partnership may be entitled to death benefits—that is, no retrospective application exists for the PSSAP. Likewise, these rules also do not apply to CSS and PSS members.

For a minister who is lauding his and his government’s efforts in addressing inconsistencies within these three funds, the situation remains a farcical one. To withhold retrospective and comprehensive application of interdependency relationship rights to all public sector employees is by definition discriminatory. In effect, the minister is asserting that the only legitimate interdependent relationships that exist are those of new members who began employment on or after 1 July 2005. For all other same-sex partners the partnership arrangement remains illegitimate from a superannuation point of view. There is no ethical, legal or financial reason why one group of public sector employees should be treated differently from another on the basis of differing partnership arrangements under differing superannuation arrangements. This is the stimulus for the amendment to the bill that I will move later—to yet again seek to rectify a gross inequality that the government has previously committed itself to address.

For several years now, the Democrats have sought often—but not always in vain, I should acknowledge—to amend superannuation legislation to harmonise the treatment of the variety of partnerships and relationships that exist in Australia. On this point the Prime Minister apparently agrees with us. He recently stated:

... I am strongly in favour—as my Government has demonstrated—strongly in favour of removing any property and other discrimination that exists against people who have same-sex relationships.

Why, then, does the Minister for Finance and Administration, Senator Minchin, still fail to correct the disparities which exist? Why do we have a situation whereby some public sector employees in same-sex relationships benefit from the rights accorded to them by this government, through the acknowledgment of an interdependency relationship, while others are not yet afforded this right? I know this is a matter which concerns many members of the coalition. I put it to Senator Minchin and the government once again, for the record, that they need to act to rectify the inconsistent treatment of superannuation for interdependent partnerships.

One final issue I will be seeking clarification from the minister on is that there is no intention by the government to streamline the funds under management in line with a single board structure. In making that remark I must comment favourably on the very cooperative and helpful stance adopted by the minister, through his office and his advisers. That is an extremely important issue for members of the PSS and PSSAP funds, since the CSS is a closed defined benefit fund and pooling the trust assets under management by the single board could in effect lead to a dilution of equity away from PSS and PSSAP members to CSS members. I support the proposed legislative changes contained within the bill but I will be moving amendments which I hope the government will see its way to support. All Australians, not just heterosexual Australians, deserve the peace of mind of knowing that their hard-earned retirement savings are being managed on a consistent and common basis within a secure superannuation system.

The Superannuation Legislation Amendment Bill 2004, the second bill we are considering here, amends the Superannuation Act 1976, which addresses the provisions for superannuation salary for secretaries of departments and certain persons who are appointed to Australian government offices and are members of either the Commonwealth Superannuation Scheme or the Public Sector Superannuation Scheme. The bill contains two schedules. Schedule 1 more accurately defines salary for superannuation purposes. It also extends the authority to determine superannuation benefits for secretaries and other office holders—currently an authority held only by the Remuneration Tribunal—to ministers and presiding officers of parliamentary departments. Schedule 2 amends the administrative rules of the PSS to allow for schedule 1.

This bill clearly defines salary for the purposes of ascertaining applicable superannuation benefits. This is important to avoid a potential windfall in favour of an individual, which was not the original intent of the legislation. By providing legal authority it also protects recipients against challenges to the validity of such payments, including payments and arrangements informally made in the past. The bill does not increase public servants’ remuneration, nor does it decrease the entitlements of office holders, but it does increase the power of ministers and presiding officers of parliamentary departments, we think in an appropriate manner.

There is another matter that pertains to superannuation that I would like to raise today. In a Perth Sunday Times article on 30 April 2006, senior radio, TV and press journalist, Liam Bartlett, wrote an article entitled ‘Shame—it’s not super news for all’. He wrote that last year alone the Australian Taxation Office raised no less than $270 million from employers who had, for one reason or another, failed to cough up their workers’ proper superannuation entitlements. Mr Bartlett gave some specific examples. No doubt he also had in his mind the saga of a former Western Australian Labor minister who has been the subject of recent media comment for allegedly failing to pay superannuation on time to workers in his business.

Mr Bartlett identified a number of problems. Firstly, that the ATO admits to limited resources for chasing nonpayments; secondly, that the ATO admits that getting the number of complaints through the system takes at least three months to process; and, thirdly, the ATO admits employers simply stonewall their efforts. Liam Bartlett was rightly enraged and rightly suspects that the number of rogue, crooked and opportunistic employers either not paying or underpaying workers’ superannuation entitlements is very high. It is theft—nothing more and nothing less. These crooks are probably the same wonderful business men and women who the government thinks will deal with their employees fairly when it comes to hiring and firing. This is not just a problem for workers; it is also a problem for future taxpayers and future governments, because every dollar of superannuation guarantee that is not paid or is underpaid is a dollar that taxpayers will later have to pay to help look after those workers in their old age.

Most Australians would be shocked to learn that their superannuation guarantee payments, compulsory payments that must be paid by an employer to an employee’s nominated superannuation fund, are threatened by a lack of supervision and auditing by government agencies. More shocking still will be the news that this can occur so simply and that it could indeed be widespread. We simply do not know the scale of the problem, because auditing in this area is so poor.

In his article, Mr Liam Bartlett made two proposals: to include the declaration of an employer’s payment of their superannuation guarantee payments in their quarterly business activity statement and to reintroduce the quarterly employers advice to their individual employees regarding an employer’s superannuation guarantee payments made on behalf of that employee. The key question is whether the adoption of either or both of these proposals would raise the level of employers’ compliance with their obligation to make the relevant superannuation guarantee payments.

Taxpayers who are registered for the goods and services tax must report their periodic tax obligations and entitlements to the ATO on a single tax compliance form, known as the business activity statement or BAS. There is a separate form, an instalment activity statement, for taxpayers who are not registered for the GST. The following obligations and entitlements are reported on the BAS: GST; wine equalisation tax; luxury car tax; PAYG amounts withheld from payment; PAYG instalments; FBT, fringe benefits tax, instalments; and deferred company instalments. Would the inclusion of superannuation guarantee payments on the BAS ensure that these payments are made?

It would be a relatively simple matter for the BAS to include the obligation to report all superannuation guarantee payments made. However, such an obligation most likely could not separately identify the particular guarantee payments made in respect of individuals or the obligations incurred in respect of those individuals. Further, the arrangements for ensuring compliance with the reporting obligations for the BAS appear to be relatively light compared with the existing penalties on an employer, where the ATO actually enforces those rules, for not meeting their superannuation guarantee payments. So, again—as is frequently the case in Australia—the problem is not the penalty; it is the detection and enforcement of the matter concerned.

The requirement for an employer to pay superannuation guarantee payments on behalf of employees arises under the Superannuation Guarantee (Administration) Act 1992. If the employer does not make the required guarantee payments on behalf of the employees by the due date—which is 28 days after the end of the relevant calendar year quarter—they are liable to pay the charge. That charge is made up of several components. There is an administration fee of $20 for each employee for whom there has been an underpayment or late payment of contributions plus nine per cent of the salary and wages of each employee for whom an underpayment or late payment is made. Actual salary and wages are the basis of the calculation of the penalty, rather than the generally lower ordinary time earnings or notional earnings base normally used as the basis for calculating the employer’s guarantee obligations. There is also a 10 per cent per annum interest rate calculated from the start of the relevant quarter, rather than from the date the contribution should have been made. The above penalties are not tax deductible to the employer, whereas the superannuation contributions made on or before the due date would have been. The first three penalties, individually known as the superannuation guarantee shortfalls, are automatic and apply even if the contributions are made shortly after the due date. Together with penalties for not keeping proper records, the first three of the penalties listed above make up the charge.

I have spent some time outlining that to indicate that the penalties are strict and powerful, but the auditing and enforcement are not. It is the self-assessment nature of an employer’s compliance with the superannuation guarantee scheme that is its essential weakness. An employer’s noncompliance may well be discovered if that employer is subject to an ATO audit. However, such audits are infrequent and unlikely and therefore many employers decide that the risk of facing the above penalties for noncompliance with their superannuation guarantee obligations is small and the financial benefit of such noncompliance is great. So the problem is audit and enforcement.

The obligation of employers to report to employees on the amount of their superannuation guarantee contributions was contained in section 23A of the SGAA. The provision was inserted into that act by the Taxation Laws Amendment (Superannuation) Act 2002 and became effective on 1 July 2003. It was removed by the Tax Laws Amendment (Superannuation Reporting) Act 2004. The Association of Superannuation Funds of Australia strongly opposed that repeal; the Investment and Financial Services Association also believed Australians should know where their super is paid and be in control of that process; the Australian Consumers Association was concerned about the reduction of the flow of information to the employee; and the Australian Institute of Superannuation Trustees considered the proposed removal of the reporting requirement to be regrettable and retrograde.

The main argument against the repeal of section 23A of the SGAA was that it lessens the flow of timely information to members and thereby reduces the opportunity for appropriate action to enforce compliance with the requirements of that act by the member or the ATO. Further, it is argued that this reduced flow of information will increase public disengagement from superannuation and lead to a greater amount of superannuation being placed in the lost category, especially for casual employees.

Mr Bartlett’s article noted that the ATO was aware of 12,000 official complaints regarding unpaid superannuation contributions. A case study featured in the article highlighted the length of time and apparent ineffectiveness of the ATO’s activity in following up these complaints. Any restoration of quarterly reporting by employers to employees of superannuation contributions made on their behalf would only increase the number of outstanding complaints. Of itself, this would not achieve higher employer compliance with their superannuation obligations. This would only come about if the ATO were given additional resources to follow up the increasing number of outstanding complaints about unpaid superannuation contributions and if it were given the additional resources to do the audit and enforcement that are necessary. If the coalition really had the interests of the battlers in mind, that would have been announced in the budget yesterday, and it was not. I think that is regrettable. But it is a matter the coalition can address and it is a matter they can deal with.

The situation arises because of the voluntary nature of reporting superannuation guarantee payment errors or deliberate underpayment or nonpayment and the fact that it is very hard to chase these up and to find out about them. The government must do something to secure the superannuation rights of employees. In my opinion, section 23A of the Superannuation Guarantee (Administration) Act 1992, which was abolished on 1 July 2005, should be reinstated and there should be regulation forcing employers to report their superannuation payments to the ATO. But if the government does not want to do that, it should investigate a bounty system whereby the super funds would be licensed to audit employer contributions where there is a suspected breach and be paid a bounty for every crooked employer caught out. The government must act and must find a means to ensure that the superannuation entitlements of Australians are properly paid on time by all employers.