Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Hansard source

I thank Senator Gallagher for her contribution and generally. I thank the opposition for the way they have engaged with the government in relation to this very important reform package.

First of all, to perhaps facilitate some further work to be done in relation to the amendments Senator Gallagher has flagged to Labor's amendment (5), while we have not seen a written version of it, my advice is that the effect of the amendment the way we understand it—you have spelled it out in the chamber—would be to effectively maintain the current threshold at $180,000; it would not have the effect of reducing it to, as we understand to be your policy, $75,000. So, you might just want to have a look at that. We understand what your policy is, but my advice is that the way it is currently drafted it would not actually achieve that outcome.

In order to facilitate the debate I might just quickly put forward the government's position in relation to all of the opposition's amendments. In relation to the division 293 threshold, Labor has proposed to reduce that to $200,000. Under Labor's proposal the number of people who are paying that higher so-called division 293 tax in 2017-18 would double. Lowering that division 293 tax threshold from $250,000 to $200,000 would result in around 290,000 individuals paying additional tax on their contributions in 2017-18. Compared with the government's policy, we believe we got the balance right in relation to our package overall, and we do not support the further reduction of this threshold to $200,000.

In relation to the proposal to lower the annual non-concessional contribution cap to $75,000, again, the government believes that in the package we have put forward we got the balance right. We do not support a further reduction to the non-concessional contribution cap to $75,000. We are already proposing to reduce it from $180,000 to $100,000. So, the $100,000 annual cap, together with the $1.6 million total superannuation balance eligibility test, does in our view strike the right balance between providing flexibility for those who are saving for their retirement and targeting the tax concessions to prevent superannuation from being used as an estate planning vehicle. The government is saying that only if you have a balance of less than $1.6 million will you be eligible to make non-concessional contributions, and in that context we believe that the $100,000 threshold is appropriate, that Labor's amendment would impact a further 90,000 individuals compared with the government's policy, so we do not support that proposal.

In relation to the amendments relating to this proposition that we should not improve access to tax deduction for personal contributions, we are disappointed that Labor does not support the Turnbull government's legislation to allow more people to make tax-deductible personal superannuation contributions. Senator Leyonhjelm has touched on this particular feature of the government's reform package. We are disappointed that Labor does not want to provide Australians with flexible options for saving for their retirement. This is an important measure that levels the playing field and provides all Australians, regardless of their employment circumstances, with the same opportunity to make concessional contributions to their superannuation.

Not proceeding with the changes to deductible personal contributions would prevent around 800,000 Australians from making voluntary concessional contributions in 2017-18. The removal of the 10 per cent rule will provide many employees whose employers do not offer salary sacrifice with the opportunity to make voluntary concessional contributions to improve their superannuation balances. Employees who do not have access to salary sacrifice—around 1.8 million Australians—have lower average taxable incomes and lower average superannuation balances compared with those who do. The average adjustable taxable income of employees who do not have access to employer salary sacrifice is around $45,000, and the average superannuation balance is around $60,000. In comparison, the average adjusted taxable income of employees who do have access to employer salary sacrifice is around $69,000, and the average superannuation balance is around $108,000.

Access to voluntary contributions to salary sacrifice varies by the size and sector of people's employers. Of businesses with 50 employees or fewer, around 700,000 Australians in total, around 80 per cent do not offer superannuation salary sacrifice arrangements to their employees. Almost half of farm workers and more than one third of hospitality sector workers do not have access to salary sacrifice. So, again, we believe that the government's reforms in this space strike the right balance.

In relation to Labor's proposal not to allow catch-up concessional contributions, we believe it is very important that people who spend time out of the workforce and whose income varies considerably from one year to the next are able to catch up on their retirement savings. This is why, from 1 July 2018, we will allow people who have superannuation balances of less then half a million dollars to carry forward any unused concessional cap space amounts. It is an important measure that levels the playing field and provides all Australians with the opportunity to make full use of the concessional contributions cap to boost their superannuation savings. This is expected to help around 230,000 Australians in 2019-20. This will assist people who take time out of work or whose income varies considerably from one year to the next or who find that their circumstances have changed—for example, mortgage payments or school fees have ceased—and are in a position to increase their contributions to superannuation. Many or the majority of people in these circumstances are women.

Labor's proposal on the other hand, in not supporting this change, means that they do not want to help 230,000 Australians who have taken time out of work to look after children, to care for an elderly parent, or to improve their employment prospects through further study who find themselves in a position where they are able to save more for their retirement to save for their retirement. In summary, the government will not be supporting Labor's amendments and commends that the bill be supported by the Senate as it stands.