Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Hansard source

It is going backwards. I accept the validity of the point of long-term rates of return in the context of super. But I would make the point that there will be no admin fees. Often, in a lost account, the admin fees send the account backwards despite the positive interest that would accrue over the long term. So there is an advantage in this methodology that is being taken. Secondly, whilst it is difficult to estimate, there will be a higher claim rate from departed temporary entrants simply because it is easier for them to go to the ATO, an Australian government instrumentality, than to have to find their money in one of 600 superannuation funds, including about 12 eligible rollover funds. So there are actually advantages in being able to access their money back in Australia for those departed temporary residents who do not claim their money when they leave. Whilst it is relevant to lost superannuation—I have made many comments over the years about lost superannuation, and most of the temporary residents’ accounts would be included in that pool of lost superannuation—what the government believes is the ultimate solution to Australians’ lost superannuation accounts is a related but separate issue that I hope we deal with next year.

I want to thank Senator Coonan in particular, because the foundation for this measure actually goes back some five or six years to when Senator Kemp was the Assistant Treasurer. He introduced on behalf of the former government a measure to allow temporary residents to transfer their money out of the country, which they did not have a right to do. Secondly, there was a tax applied on that transfer to offset the tax concession. This measure actually has its genesis in that measure introduced by the former government. Then we move forward to last year. As Senator Coonan has rightly pointed out, and I accept this—we can sometimes be bipartisan in this place—this was an initiative of the former government. It was announced before the election. There were consultations that had commenced with industry before the election, but it was not legislated before the election. We indicated our support for the measure during the election campaign.

I referred the preliminary proposals to go into legislation out for further consultation earlier this year. We did make some substantial changes to the initial proposals as put forward by the former government. We did listen, and we were principally concerned about a number of administrative and practical issues. I can for the record, and it is in the EM, state that the upfront cost for industry as a whole to establish this is $30 million and the ongoing cost is about $3 million. Prior to that consultation occurring and change in the administrative features, the industry had indicated that the upfront cost was going to be $100 million or thereabouts and the ongoing costs about $10 million.

Through the listening process, the consultation process, we did change the administrative operation of this measure very significantly. For example, it was initially proposed to collect the money before the temporary entrant left Australia. We decided that it would be far simpler and less costly administratively if it were done six months after they had left the country. The industry made, I think, some valid points about administrative costs. We took notice of those points, and the final legislation reflects that. It also usefully overcame what I think would have been a serious moral issue of detriment: if the money had been collected before the temporary entrant left the country, they would not have had death and disability insurance. By collecting the money after they have left, they still maintain death and disability insurance cover. If they are, unfortunately, injured or die on a building site, for example, they are still covered by insurance. So there were some very legitimate issues raised in that initial consultation. As I said, the former government did do a great deal of work. It was their measure, and we are here considering the legislation tonight. As I have indicated, it will help reduce the number of lost accounts and the amount of unclaimed moneys in our compulsory system, which arise when temporary residents depart Australia without taking their superannuation with them.

I will just briefly digress to the point that Senator Xenophon raised about a person being effectively required to take their money out of the system. The government would argue that it is not appropriate for a nonresident—unless they come back into the country and become a permanent resident; they are treated differently—to receive ongoing tax concessionality once they leave our Australian system. The purpose of the Australian superannuation system is not to provide an ongoing tax concessional subsidy, and presumably tax-free super at age 60, for nonresidents. It is not the purpose of our system to do that. It is not the purpose of Australian taxpayers to cross-subsidise those individuals once they move outside of the Australian system.

As Senator Xenophon has raised, the treatment of Australian temporary residents working in, say, the US or the UK is pretty shameful. If you are in their system, you get nothing back. The money stays in the pool of their consolidated revenue overseas; you get not a cent back when you return to Australia if you are a temporary resident working overseas. It is not true of all jurisdictions, but it is certainly true of places like the UK and the US, where Australians tend to work. While temporary residents who depart Australia are able to take their superannuation with them as a departing Australia superannuation payment, many do not do so. We have a figure. We estimate less than 10 per cent actually transfer it. This contributes to the total amount of lost moneys in the system. The amendments contained in the bill seek to address the lost account problem by requiring superannuation funds to pay the unclaimed superannuation to the tax office. The government has consulted on the measure. We released that discussion paper in May, we made significant changes and we have the legislation that is presented here today.

There are a couple of other matters I will try to cover off prior to the committee stage. Regarding the issue of the communications campaign, it is extraordinarily difficult to contact these people. Senator Coonan knows from her experience just how difficult it is when people leave the country and provide no ongoing forwarding information and no ongoing contact with their fund. To the credit of the previous government, they did introduce onto the back of the departure cards an ongoing forwarding address space. We will be building on that. The ATO is going to develop a communication strategy. The measures will include mail-outs to fund members informing them of the changes, website information, and media and editorial programs. Articles communicating the changes will be submitted to various internal and external publications. This will include targeted publications read by backpackers, international students and other groups associated with temporary residence. Current publications will be updated to reflect the changes. I do not in any way want to suggest to the Senate that this is easy—it is not, as Senator Coonan knows—but we will be making best efforts, and I am happy to provide further details once that campaign is finalised.

There is one other issue I want to comment on briefly, an issue that has not been touched on by those who attended the Senate Standing Committee on Economics and which is a legitimate issue that has come to the government’s attention only in the last couple of months as a consequence of the global credit crisis. I think it was legitimately pointed out at the hearings that at the present time superannuation funds are experiencing a greater than normal switching or flow of funds from non-cash investment options to cash investment options, and that places a greater pressure on funds to ensure liquidity in these current times. APRA, as the regulator, is well supervising and managing this particular issue, but this measure would place additional pressure on some funds. This was raised at the hearing.

As a consequence of that, the government believes that this is a legitimate concern. It was a new issue that had not been considered by either the former government or us back in May. It is a consequence of recent developments in financial markets. Therefore, we have indicated—we will get to the amendment—that, for a fund where there is a liquidity issue for transferring the moneys, if an application is made to the regulator, APRA, who has responsibility for prudential regulation, including liquidity, and APRA comes to the conclusion that there is a legitimate liquidity issue, the moneys are not forgone but there is consideration and they can be paid at a later date. We think that is a reasonable approach if the fund can show legitimate concerns about liquidity in these current uncertain times.

I think those are the main issues that are being raised in debate. This is obviously an important revenue measure. It is almost $1.2 billion in revenue, so it is significant. I conclude my remarks at this stage. We will get to the amendment to be moved by Senator Xenophon. We will not be supporting the amendment; we have some significant concerns, and I will outline those concerns in the committee stage. I thank all those who have taken an interest. This has been a complex measure by any consideration. It comes at a sensitive time. There is a lot of interest in superannuation at the best of times and, indeed, the not-so-best of times, as the funds are experiencing at present. I thank the various industry organisations and the funds for their ongoing interest and the very positive suggestions they made in the initial rounds of consultations. I thank and acknowledge the former government, including the former minister, Senator Coonan, and thank everyone for their contributions.

Question agreed to.

Bills read a second time.