Mathias Cormann (WA, Liberal Party, Shadow Assistant Treasurer) Share this | Hansard source

I can well understand why senators on the Labor side of the parliament want to stop me from talking about this. They are very embarrassed about their very bad track record over the last three years when it comes to superannuation. This Labor administration have had a terrible record over the last three years when it comes to superannuation. They have failed to take on board many of the Cooper review’s very sensible recommendations to improve corporate governance arrangements for superannuation. They have created and then continued to protect a closed shop, anticompetitive arrangement when it comes to the selection of default superannuation funds under modern awards. And then there is this issue here, with superannuants across Australia inadvertently breaching the concessional and non-concessional contribution caps, which on the face of it is an increasing problem on the back of decisions made by this government.

Let me explain the problem we have. As part of a very sensible policy to encourage and increase voluntary contributions to superannuation, the Howard and Costello government put in place the opportunity for people to make concessional contributions of about $50,000 per annum if they were below 50 years of age or $100,000 per annum if they were older than 50 years of age. In the lead-up to the 2007 election the then Rudd government promised that they would leave those contribution caps in place unchanged. They said they would not change them one bit—not one jot, not one tittle. But of course they did. They reduced them. And what is the effect? More and more people across Australia are inadvertently breaching those contribution caps, which were halved by this government with effect from 1 July 2009. What does it mean? It means they get slugged by this government with an additional tax. A similar problem exists in relation to non-concessional contributions, and again the feedback is that this problem is increasing.

This is not a case of people trying to mislead, cheat or deceive the tax office and somehow trying to avoid an obligation to pay tax, because clearly it is all transparent; it is all out there. Invariably, these mistakes are inadvertent. What should happen with inadvertent mistakes, as happens in the broader tax system, is that people should be able to correct their records. Instead, the government is applying, as far as non-concessional contributions to superannuation are concerned, the marginal rate of tax on top of income that has already been taxed potentially at the top marginal rate—potentially taxing people 93c in every dollar earned that ends up in that particular circumstance.

This is not a new problem; this is a problem that, to be fair, has existed for some time. But it is a problem that, as far as concessional contributions are concerned, has worsened under this government. If you bring those contribution caps down, inevitably more people are going to be caught by it. I want to know from this government how many people are being caught by it, how much additional tax they are paying to the government and what the government are going to do about it. I happen to know that this information is not complicated and complex for the government to identify, because the ATO are well aware of the issue and it is data that they surely collect as a matter of course. Whenever this government do not want to provide an answer, whenever they go into hiding, you know that they are up to something; you know that there is a problem. They clearly have something to hide.

As I mentioned earlier, Labor, as much as they try to sell themselves as the advocates of superannuation, actually have had a very bad track record over the past three years. There has not been much that is good happening in superannuation over the last three years. People are now locked into anticompetitive, closed shop default superannuation arrangements under modern awards. The government are not prepared to ensure that there are better corporate governance arrangements in place as recommended by Jeremy Cooper in his comprehensive review. I do not know why the government refuse to ensure that there are independent directors on all superannuation funds. I do not know why the government do not think it is sensible to ensure that, in order to avoid conflicts, people sit on only one board and not multiple boards. I do not know why they are opposing recommendations to ensure that there is proper transparency in the investment decisions made by various funds.

But I have a suspicion why. My suspicion is that we have a minister in Minister Shorten who is letting his union bias get in the way of acting in the public interest. If Minister Shorten was more focused on doing the job that he has got, instead of telling anyone who would listen that he will be Prime Minister in the lead-up to the next election, then we would be able to make a bit of progress. If he was focused on doing his job, he might be able to provide an answer within 30 days, as he is required to do under our standing orders, instead of giving us a big explanation as to how this data is somehow really complex. I happen to have in front of me information that has been provided in relation to these matters by the ATO previously and circulated across the industry and I am convinced that the ATO is well capable of providing the information that I have asked for in my question on notice. I think that as well Minister Sherry, who I am sure is across this issue, would actually be well aware that the ATO would be able to respond to these matters.

In fact, a lot of organisations have raised this issue with the government and a lot of organisations have raised this issue with the new Minister for Financial Services and Superannuation, including the Financial Planning Association of Australia. These organisations have made some very sensible recommendations and I would like to know what Minister Shorten is proposing to do about them. For example, the law should be amended to remove the 46.5 per cent penalty rate that applies when the non-concessional contribution cap has been breached inadvertently; instead the process should be to refund excess non-concessional contributions back to the taxpayer. It is their money. It has already been taxed at whatever the marginal tax rate is that applies to them. Why should the government tax it again? It is hardly in the superannuant’s interest to somehow conceive something so he can be whacked with a 93 per cent tax. Why isn’t the government doing what needs to be done to quantify the problem, to take action and to resolve it? There should not be a monetary penalty, according to the Financial Planning Association, if it is the taxpayer’s first-ever breach of the non-concessional contribution cap. I think that is a sensible suggestion. There should be a monetary penalty or perhaps an administration cost recovery fee charged to the taxpayer if there are subsequent breaches of the contributions cap. And there is a whole range of other recommendations that I am happy to forward to the minister so he might actually be able to focus on how to do his job and resolve issues for the Australian people.

But the important thing to remember is that clearly this is a problem which has got worse as a direct result of the actions taken by this government. Instead of encouraging people who are at a stage of their life when they can better afford to make additional contributions to their superannuation, this government reduces the caps. It halves the concessional contribution caps, which is exactly the wrong way to go if you want to boost retirement savings. So it is talking about wanting to increase the superannuation guarantee from nine to 12 per cent, instead of encouraging more voluntary contributions. As a direct result of what the government has done, people across Australia are being penalised and are paying more tax than they should have to. I think the government should provide a proper explanation in relation to all these matters.

Let us go through the questions which the minister says are too complicated to answer but for which I am absolutely convinced the minister has the information sitting on his desk right now. Remember that these are the sorts of questions that the minister says are too complex. So for the last three financial years:

...  how many individuals made contributions above the concessional and non-concessional contribution caps respectively;

I am convinced the minister knows the answer to that question. I bet he has got a briefing note in his office right now which is telling him exactly how many people have been caught by this. I am convinced that the number of people that are being caught by this is increasing. Then:

... what was the average amount paid above the concessional and non-concessional contribution caps respectively;

I am convinced the Australian Taxation Office has got that information in front of them and I would be surprised if they had not made that information available to the minister. Then:

... what was the total amount of taxation collected as a result of contributions above the concessional and non-concessional contribution caps respectively;

That is an entirely legitimate question. In essence, how many people are getting hit with this and how has this been trending over the last three years? How much in additional tax are they paying when they should not be paying any additional tax? Then:

... what was the average amount of excess concessional contributions that counted towards the relevant individual’s non-concessional contribution caps for the same period; ...

That is very sensible information for us to be able to assess the extent of the problem. What this really comes down to is that we have a minister who is continuing to regurgitate all of the statements about superannuation that have been made by his predecessors. He has not come up with one single new idea of his own. He has not attacked one single problem that exists in the superannuation industry today and made a decision on how to fix it. All we have had is this union-bias-driven protection of the current process of selecting the default superannuation funds under modern awards. We have had some vague response to the recommendations of the Cooper review that are, quite frankly, non-controversial and we have had a regurgitation of statements that had been made by his predecessors in relation to the proposal to increase the superannuation guarantee from nine to 12 per cent and the proposed introduction of MySuper.

The minister has backed away from commitments that were made by this government in the lead-up to the most recent election. I think those might have even been through Minister Sherry, if not Minister Bowen—I do not remember exactly. In the lead-up to the last election the government made an election commitment to fix up the process by which default superannuation funds are selected under modern awards—so they would make it more open, more transparent, more evidence based, more competitive—and said they would ask the Productivity Commission to do the job for them. But as soon as the government scraped back in and we got this new minister for superannuation all of that was forgotten. It came down to the Senate to refer this particular matter to the Productivity Commission for report back to the Senate by the end of May. So the point I am making is it is just not good enough that Minister Shorten is not able to answer a question about an issue that is potentially impacting on thousands and thousands of Australians who are paying more than they should in taxes as a result of inadvertent breaches of their contribution caps, inadvertent breaches that are made more likely as a direct result of some of the decisions that have been made by this government. Specifically, this government has broken a promise not to reduce concessional contribution caps.

In relation to the non-concessional contribution caps, this is a particularly big problem because this is money that has already been taxed potentially at the top marginal tax rate. People are able to put $150,000 into their superannuation under the non-concessional contribution or $450,000 over three years. I am sure you would appreciate, Mr Deputy President, that a worker who has been doing the right thing and making voluntary contributions and contributing over and above the nine per cent may, for example, later in the year receive an unexpected pay rise or an unexpected bonus or shift to a new job with a higher rate of pay. He might have accumulated annual leave which is paid out on transferring jobs. He or she might have multiple jobs. People might have been paid in lump sums toward the end of the year and there can be inadvertent non-intentional mistakes made. Yet, instead of allowing people to fix up those mistakes, the government hits them with a top marginal tax on top of potentially having already charged the top marginal tax rate on the income that was generated in the first place. That is double taxation.

As I have mentioned, many advisers across Australia have made the legitimate point that this exposes Australians potentially to a 93 per cent rate of tax. I know that this is a high-taxing government. I know that the Labor Party is all about higher spending and higher taxes, but I am sure that even Labor senators would agree that a 93 per cent tax takes things beyond what is reasonable and is a circumstance that should be fixed. I am sure that a 93 per cent rate of tax is something that even Minister Shorten does not think is reasonable and I am sure that it is a rate of tax that even Minister Shorten thinks something should be done about. This is my point. If he has not got this sort of information in front to him to quantify the problem, how can we expect him to take action? How can we expect him to fix a problem that he apparently is not able to identify with the basic facts and figures underlying it in the first place?

The ATO should be able to exercise its discretion and give special consideration to the taxpayers who have exceeded contributions in a series of circumstances. For example, I give the minister a bit of advice on how he can fix this. Where the contribution is a one-off large amount due to the sale of an investment asset, including the sale of the taxpayer’s business or farm, and the tax penalty that will be incurred will cause serious detriment to the taxpayer’s ability to support themselves in retirement, there ought to be some discretion applied by the ATO. Similarly, where the employer has contributed an amount in excess of the caps due to an unanticipated pay rise or bonus amount or other payments made by the employer, the ATO should be able to apply some discretion as to whether the level of penalty as it currently applies is actually appropriate. Where a fund or clearing house has made an error causing the caps to be breached and where there has been an amount transferred into super from an overseas account and currency fluctuations or unpredictable timing issues have caused the contribution to exceed the caps or fall into the wrong time period, the ATO should be able to exercise some sensible discretion to make sure that there is not an inappropriate and disproportionate penalty imposed in the circumstances that I have explained.

The reality is—and this is the point I make again—that breaches of superannuation contribution caps would almost never be deliberate. They are pretty transparent. It is pretty obvious what has happened. It is not because a taxpayer or superannuant is trying to deceive anybody. There can be honest mistakes, and when they are honest mistakes they should be able to fix them. But I want to know how many people are getting caught up in those honest mistakes without the government doing anything about it. I happen to know that people have raised this with the minister on a number of occasions and so far nobody has had any satisfaction from the minister in relation to any of it.

The ATO should be asked by the government to have a look at how they manage their systems. If the ATO truly cannot identify this sort of data—and I am sure they can; I do not believe they cannot—then they will to have a look at their systems. If they cannot monitor the extent of this problem on an ongoing basis, how can they be expected to take appropriate corrective action?

In summary, it really is time that Minister Shorten starts to focus on the job he has rather than keep chasing the job he wants. We all know that he is telling everyone he wants to be Prime Minister. But he has a job now and there are people across Australia who need him to do his job when it comes to the impact of excess superannuation contributions being taxed at inappropriate levels as a result of inadvertent mistakes. It is an issue that has been brought to the attention of the minister. I note that the minister is not able to provide an answer on the number of people and the amount of tax involved within the time frame prescribed by our standing orders. That is very disappointing. I know that Minister Shorten and the Minister for Small Business, Senator Sherry, did not give us any indication as to when we might be able to expect an answer. That is also disappointing. I hope that Minister Shorten will carefully review the Hansard of this debate and will take note that he has a job to do and that the Australian people expect him to do the job he has rather than to spend his time on chasing the job he wants.