Thursday, 18 June 2020
Treasury Laws Amendment (Your Superannuation, Your Choice) Bill 2019; In Committee
My understanding is that we're talking about fundamental changes to the superannuation system as part of the 'your super, your choice' bill. This is a fundamental change and also quite a significant change that is not necessarily related to the idea of choice, though. It is something that has been raised in the chamber before and I have spoken about it before, even though the amendment has actually been moved. It is fundamental to superannuation, as is the concept of choice.
I said in my summing-up speech in the second reading debate that choice is the corollary of compulsion. In Australia, we compel people to pay nearly $1 in $10 of nearly everything they earn into superannuation, whether they like it or not. We then shouldn't compel them to put it into a particular fund. Surely the corollary of that compulsion should be that they have choice as to where that money goes. In the same way that we don't compel people to put their money into a certain bank account, an employer can't dictate to an employee which bank account they should put their money into. We shouldn't also dictate which super fund an employee would put their money into. It makes perfect sense. It is the corollary of compulsion. In the same way, it is how in Australia you are compelled to vote but we don't tell you, we don't compel you, to vote for a particular party. No-one tells you who to vote for, but you are compelled to vote. This is not dissimilar.
The '$450 rule' is slightly different, because there are a small proportion of people in Australia who don't pay superannuation. They aren't compelled to put nearly $1 in $10 into superannuation, and they're people who earn less than $450 a month. Why $450? This is interesting: it is because if you multiply $450 by 12 it equals $5,400. Why does $5,400 ring a bell? I'll tell you why it rings a bell. It is because it was the tax-free threshold in 1992, when compulsory superannuation was introduced. At that time—and I tip my hat to Labor, because they were the party that introduced compulsory superannuation—the Labor Party said, 'If you don't earn enough to pay tax, neither should you then be compelled to put money into superannuation.' I think that's quite an interesting concept. If you don't earn enough to pay tax, should you have to take away nearly $1 in $10 to put it into a retirement savings vehicle?
I'm reasonably ambivalent on this because $5,400 is no longer the tax-free threshold. In fact, the tax-free threshold is now $18,200. So should you be compelled to pay nearly $1 in $10 of your hard-earned wages into superannuation if you don't actually pay tax?
It's actually quite an interesting question, and one that I know that the Retirement Income Review, which is being headed by Mr Callaghan, is currently looking at. It was raised by the Productivity Commission in its landmark report into the efficiency of the superannuation system in 2018, and it does make sense. But it's not a binary proposition: everybody should pay superannuation from dollar one. Yes, that makes sense in a sort of simplification manner. And can I say that the only reason that you possibly could make that happen now is that this government introduced Single Touch Payroll, and Single Touch Payroll makes it much easier for small employers to pay superannuation from dollar one. But the question is: is it fair?
There are a number of people out there at the moment that are earning less than $450 a month—often, though, from multiple jobs. If you're doing multiple jobs and you can find the $450 per month, that would make sense; you would want those people to contribute to super. But, if those people are only earning $450 a month or less than $450 a month, should you then carve out nearly $1 in $10 of everything they earn, nearly one-tenth of everything they earn, and compel them to put it away into superannuation? Quite frankly, if you're earning less than $450 a month, I would imagine that you would be counting every single penny. Locking it away—potentially for up to 40 years, quarantining that money for 40 years—might not actually create the best outcome for those people today, who need the money right now.
So it is an interesting question. I'm very, very glad that the Greens raised it. It's one that I have pondered myself and that I've written about—I've been published on this issue. I spoke about it before I came to the Senate chamber, when I worked at an industry super fund myself, when I worked at AustralianSuper. It is an interesting one, and it does also disproportionately affect women, theoretically. However, there doesn't seem to be very much in the way of current data on that, which is something that I am desperately hoping the Retirement Income Review will address.
The Retirement Income Review, as you would well know, is going to create a fact base on which we can all agree, and then we can leverage that fact base and build superannuation policy on the basis of that. Let's face it: at the moment with superannuation, terrific as it is—a $3 trillion industry, bigger than the ASX, bigger than GDP; it's quite extraordinary—there are so many dissenting voices in this industry. Nobody speaks with one voice. I think we can genuinely agree that it is the most partisan part of the financial services sector, and it's very hard to find a voice in there without a vested interest behind it. We can speak of the funds, the industry bodies and even the think tanks—it's very hard to find somebody that doesn't have a finger in the pie. Even the Grattan Institute—and I love the Grattan Institute—is associated with—
An honourable senator: Do you, really?
I do; I love the Grattan Institute.
An honourable senator: With a love-hate feel.
A love-hate relationship, admittedly. They don't always agree with me, but that's alright—my colleagues in the chamber don't always agree with me either, and I love them all dearly as well. But even the Grattan Institute—they're associated with academia and universities, so they, too, speak with an academic industry super fund hat on. But, that said, what we would like to do is create a fact base from which we could then leverage future superannuation policy that doesn't have the lens of vested interest looking down into it. I can see I've got the attention of the opposition over there.
An honourable senator interjecting—
That's because, as you would well know, this is an industry that I feel profoundly passionate about. I have worked in the industry all my life. And I don't like to play favourites. I've worked in retail and I've worked in industry super. I heard Ian Silk—my old boss, my former CEO—on the radio, on RN, just this morning, as I'm sure many of you did, talking about the dangers of the flight to cash that we've seen in the superannuation sector just in the last few months. We want to make sure—I know this is very important to Senator Patrick—that people make informed choices, and I mentioned that in my summing up speech, Senator Patrick, as you would well know. We want to make sure people get a chance to make informed choices about their superannuation. But choice is what is fundamental here. Choice is what you're denying by putting forward this amendment. This amendment is all about denying or restricting choice, and we've got dozens of examples here—people might not have chosen UniSuper; they might be stuck in UniSuper. This particular amendment compels people who have ever been in UniSuper or any other defined benefit fund from ever leaving, from ever having choice in any fund. It doesn't matter whether they worked in a university when they were 18 as a tutor and now have gone off to run BHP. It doesn't matter. They're stuck in that defined benefit fund for the rest of their lives, and that is unacceptable.