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

I table a supplementary explanatory memorandum, circulated in the chamber on 26 November, relating to the two government amendments to this bill and seek leave to move the amendments together.

Leave granted.

I move government amendments (2) to (8) on sheet RG296:

(2)    Schedule 1, item 16, page 6 (lines 27 and 28), omit “, by the next date set for the purpose by the Commissioner”.

(3)    Schedule 1, item 16, page 7 (line 2), after “interest”, insert “by the next date set for the purpose by the Commissioner”.

(4)    Schedule 1, item 16, page 10 (line 13), omit “by scheduled statement day”.

(5)    Schedule 1, item 16, page 10 (line 23), omit “day.”, substitute “day; or”.

(6)    Schedule 1, item 16, page 10 (after line 23), at the end of subsection 20F(1), add:

             (c)    if a day is identified for the superannuation provider under the regulations that is later than the day described in paragraph (a) and later than the day described in paragraph (b) if it is relevant—that later day.

(7)    Schedule 1, item 16, page 12 (after line 4), after subsection 20F(4), insert:

Regulations for the purposes of paragraph (1)(c)

     (4A)    Regulations for the purposes of paragraph (1)(c) may provide for a day to be identified by the Commissioner or the Australian Prudential Regulation Authority. This does not limit the provision that the regulations may make for identification of a day for those purposes.

(8)    Schedule 1, item 16, page 15 (after line 31), after subparagraph 20J(6)(a)(i), insert:

                 (ia)    paragraph 20F(1)(c); and

I have already indicated why the government has moved these amendments. The government heard from the Senate economics committee following its hearings that concerns were raised that some superannuation funds potentially may not have sufficient liquidity to meet their payment obligations to the tax office under the bill. Accordingly, to help address some of these concerns in light of the current economic climate, the government has acted swiftly to introduce parliamentary amendments to the bill. The amendments will enable regulations to be made to defer—I emphasise defer—the due dates for payment by superannuation funds in certain prescribed circumstances. For example, the regulations could provide for a short-term deferral of the payment date if APRA considers payment by the due date would have a significant adverse impact on the fund’s financial position.

This is similar to an existing power that APRA has to vary the requirements for funds to transfer superannuation benefits if it would have a significant adverse effect on their financial position. The amendments do not provide a general deferral, but funds will be expected to continue to make the necessary preparation so that payments can be made by the expected due dates. The first payments are expected to be due in April next year. Further funds are also required, under current law, to have adequate investment strategies in place to take into account, amongst other matters, anticipated liquidity requirements. Accordingly, it is expected that the payments will be deferred only in exceptional circumstances. That is an outline of the two government amendments that I moved.

Helen Coonan (NSW, Liberal Party, Manager of Opposition Business in the Senate) Share this | Link to this | Hansard source

I thank the minister for his comments in the second reading debate acknowledging the former government’s role in the genesis of this matter. I think it is a very good example of how, notwithstanding partisan approaches on many matters, there are a lot of aspects of superannuation affecting Australians on which the government and the opposition can work constructively because we see the point of what is to be achieved. I commend the minister’s efforts in this respect.

We will be supporting the government amendments. They are largely administrative amendments to ensure that the bills operate as intended. In respect of the deferred payments matter I simply note that where there are liquidity problems for funds under stress of course funds may withhold payment to the ATO. These are sensible amendments and we have no difficulty at all in indicating our support.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I indicate my support for these amendments and commend the government for showing the flexibility that is needed with the global financial crisis. I was remiss in my second reading contribution for not acknowledging the role of the coalition in their work on superannuation and the bipartisan nature of the approach in general terms.

Michael Forshaw (NSW, Australian Labor Party) Share this | Link to this | Hansard source

The question is that item 12 of schedule 1 stand as printed.

Question agreed to.

The Temporary Chairman:

The question now is that government amendments (2) to (8) on sheet RG296 be agreed to.

Question agreed to.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I move amendment (1) on sheet 5644 revised to the Temporary Residents’ Superannuation Legislation Amendment Bill 2008:

(1)    Schedule 1, item 16, page 20 (after line 22), after Part 3A, insert:

PART 3B—ADMINISTRATION OF TAXATION OF SUPERANNUATION OF ELIGIBLE TEMPORARY RESIDENTS

20Q Retention scheme

        (1)    The Commissioner must, within 45 days of the commencement of the Temporary Residents’ Superannuation Legislation Amendment Act 2008, determine by legislative instrument a scheme that enables an eligible temporary resident to retain a superannuation interest in a fund until the person reaches the age of 60 or some other later date determined by the person.

        (2)    Despite anything in section 44 of the Legislative Instruments Act 2003, section 42 of that Act applies to a legislative instrument made under subsection (1).

        (3)    Section 48 of the Legislative Instruments Act 2003 does not apply to an instrument made under subsection (1).

        (4)    If, under section 42 of the Legislative Instruments Act 2003, an instrument made under subsection (1) or a provision of such an instrument is disallowed or is taken to have been disallowed (the deemed disallowance), the Commissioner must, within 30 days after the disallowance or deemed disallowance, determine a replacement legislative instrument for the purposes of subsection (1).

        (5)    In this section:

eligible temporary resident means a person:

             (a)    for whom the superannuation provider has a current address and who maintains regular contact with the superannuation provider; and

             (b)    who would otherwise be subject to Part 3B.

20R Application of Part 3B

                 Part 3B does not apply to any person unless the Commissioner has determined a scheme in accordance with section 20Q and the scheme has been implemented.

This amendment addresses the inequity of the operation of the bill for those temporary residents who maintain an active interest in their superannuation fund. The intent of the amendment is to provide a level of protection to those temporary residents who are actively pursuing their superannuation funds by requiring the commissioner to determine a scheme that enables eligible temporary residents to retain their superannuation interests in a fund until that person reaches the age of 60 or some other later date determined by the person. An eligible temporary resident is defined as a person for whom the superannuation provider has a current address, who maintains regular contact with the superannuation provider and who would otherwise be subject to the amendments made by this act—that is, those provisions that would result in the transfer of the benefit to the ATO and be subject to the DASP when claimed. These funds will not be subject to the DASP where the temporary resident claims their benefit at 60 years of age or older.

Subclause 2 of the amendment relates to the application of the Legislative Instruments Act 2003. Section 42 of that act provides for the disallowance of legislative instruments subject to section 44, which lists legislative instruments that are not subject to disallowance. That list includes instruments, other than regulations, relating to superannuation. The amendment is intended to ensure that any scheme determined by the commissioner is disallowable by precluding the application of section 44 of the Legislative Instruments Act 2003.

Subclause 3 relates to the application of section 48 of the Legislative Instruments Act 2003, which provides that an instrument that is the same in substance as a disallowable instrument cannot be remade within six months of the original disallowance. This subclause provides that section 48 does not apply. It ensures that, under subclause 4, the commissioner is able to determine a replacement scheme for the purposes of subclause 1 before the six-month period expires.

Under subclause 4, the commissioner must determine a replacement scheme within 30 days of the initial disallowance. The aim of this amendment is essentially to ensure that the commissioner implements a scheme that is sufficient to meet the intent of the amendment and to require the commissioner to implement a new scheme within a shorter time frame than would otherwise be allowed—that is, 30 days rather than six months, pursuant to the Legislative Instruments Act 2003.

Clause 20R relates to the application of the amendment. It prevents the commissioner from requesting the transfer of benefits from superannuation funds until such time as an appropriate scheme has been determined under subclause 20Q(1) and implemented. The amendment applies to former, current and future temporary residents. It essentially provides an opt-in mechanism for those residents. If this bill is about genuinely lost super then for those who maintain contact with their fund—and there is the flexibility there as to what is defined as regular contact; that needs to be determined—the intent of it is clear. It is to ensure that they are not penalised if they maintain contact. So we are not talking about lost super.

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

I was going to allow others to speak first, but we have made an error for which I have to take responsibility. I am informed by our very helpful Clerk that amendment (1), which we all voted yes for in terms of supporting the intention, we actually all have to vote no to remove.

Honourable Senator:

Honourable senator interjectingYou’ve had a Parry moment.

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

And a Sherry moment, because I take responsibility for something that happened earlier tonight—well, not full responsibility; there was a similar type of issue. So I seek leave to put the question on amendment (1) again.

Leave granted.

The Temporary Chairman:

The question is that item 12 of schedule 1 stand as printed.

Question negatived.

The Temporary Chairman:

We will now deal with Senator Xenophon’s amendment (1) on sheet 5644.

Helen Coonan (NSW, Liberal Party, Manager of Opposition Business in the Senate) Share this | Link to this | Hansard source

I spoke sotto voce, but I should place on the record that I do think we need flashing lights on those particular votes, because they do catch you out unless you are thinking perhaps more sharply than we seem to be at this hour. Anyway, we were all caught by it.

I thought it might be useful to just indicate to Senator Sherry—because I am sure were I in his position I think I could almost anticipate what he would say—that the coalition’s disposition is to support Senator Xenophon’s amendment. I will not go into it at great length, other than to say that our reasoning is that it will allow superannuants returning from overseas to opt out of the requirement that their account balances go to the ATO. It will require such superannuants to remain in contact with their superannuation fund. Of course, that is a fundamental requirement. This measure will provide that such fund balances will not be considered as ‘lost’ in the general sense of the word, which is my understanding of what we are really all about here.

As I said, I can almost anticipate what the adviser and Senator Sherry will say. I can even put myself back a couple of years and imagine myself saying what Senator Sherry will say. But that is our approach to this. Our view is that it does provide a better balance, more fairness, for those temporary residents who choose to maintain their superannuation accounts in Australia. I take Senator Sherry’s point that other jurisdictions do not necessarily permit this, but we have taken the approach in Australia where we encourage people to stay in touch with their superannuation. We are trying here to ensure that superannuation is not lost, that people do not lose what they are legitimately entitled to as part of their superannuation savings, particularly because we do have a compulsory system and we take a very robust view of encouraging people to save in our superannuation system.

I do think that this amendment helps to facilitate choice. It is what the coalition have been about in our approach to compulsory superannuation—that people can choose how they place their superannuation, how they transfer it and, ultimately, how they access it. To our way of thinking, choice in superannuation must always be fostered. Choice will remain one of the foundation tenets of our approach to superannuation. We think that Senator Xenophon’s amendment—notwithstanding what I apprehend Senator Sherry will say—will in fact facilitate the objectives of this very important legislation that we support and that fund balances will not be considered lost where superannuants remain in contact with their fund.

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

Firstly, I would make a couple of points. This was not in the former government’s original proposals and it will impact on revenue. We will make that point very strongly. I would urge the opposition, if this is passed—and there will obviously be time when the message comes back from the House of Representatives—to really have a deep think about what they are doing here. It will impact on revenue. We are talking here about $1.2 billion in the forward estimates—from a measure that you proposed when you were in government. This will impact on revenue. We will obtain an estimate, as best we can, but it is likely to be in the hundreds of millions of dollars. I just issue that word of strong caution about what the opposition will open themselves up to. Having not flagged this approach in their own legislation before the election and putting forward $1.2 billion in revenue, we are now going to lose some part of that—and we will estimate that over the coming days. Obviously we are not sitting tomorrow. So I just issue that strong caution to you about what the opposition will open up in terms of the revenue approach.

The amendment has been put together by Senator Xenophon this afternoon. I do not want to be overly harsh, Senator Xenophon, but the structure of the amendment does reflect, I think, the late drafting of the amendment. If you look at it, there are a number of particular problems with the drafting of the amendment. Firstly, with respect to (5)(a), it says, ‘for whom the superannuation provider has a current address and who maintains regular contact with the superannuation provider’. Administratively, practically, how on earth would that be done? What is a current address? Is it a current Australian address? I am not being flippant here. Is it their current Australian address or their current overseas address—after the departing resident has left? We have had a debate about admin costs. Think about the admin costs associated with this. I would suggest that the superannuation industry itself did not put this amendment forward at the Senate hearing—did not make the suggestion of an amendment in this form.

Secondly, what does ‘regular contact’ with the fund mean—monthly, six-monthly, quarterly, yearly, five-yearly? There is no definition of what ‘regular contact’ is. Again, I think that reflects the way the amendment has been drafted. I do not know of any other provision where the commissioner is given this sort of power to make determinations.

Then there is the issue that I touched on in my opening comments. It is not the purpose of the Australian compulsory superannuation system to maintain ongoing tax concessions to temporary residents who have left the country. This has enormous implications. It is not the purpose, once a temporary resident has left this country, to allow them, from overseas, to continue actively operating a superannuation account in the Australian jurisdiction and have the Australian taxpayer pay for it, ongoing. I really do urge great caution on the opposition. They will have some time to think about this if it is passed tonight. The government strongly opposes this—very, very strongly opposes this—for the practical and the fiscal reasons that I have outlined and for the very basic reason that it does come as a surprise to me that the now opposition would support a measure that runs contrary to and indeed weakens their own policy that was announced prior to the election. I think even Senator Coonan would appreciate some of the political points that would be made in the broader community about this. I am just forewarning of the criticism that is likely to flow if this particular amendment is passed.

Senator Xenophon, we had a number of meetings earlier today. You did reconsider other amendments, and I did indicate to you when you mentioned this to me—this is not breaking any confidences—that we would not be supporting this approach and that I had some concerns about it, and I have dealt with those concerns.

David Bushby (Tasmania, Liberal Party) Share this | Link to this | Hansard source

I thank the minister for his comments and I thank Senator Xenophon for his amendment, which, as I understand, probably was a fairly last-minute thing. But I think it does raise some important issues and attempts to deal with them in a way which I believe is reasonably flexible. A lot of the issues raised by the minister can be dealt with by the method and the construction of the instrument that the amendment refers to if it is passed.

I found it interesting that the minister is referred to the principle that it is not appropriate or it not the purpose of the system to subsidise people not living in Australia. I do not agree with that as a general proposition. Essentially, we allow people to come here—we give them a visa entitling them to work here. I would have thought the Labor Party, of all the parties, would be inclined to ensure that their rights arising from the work that they do in Australia would be protected and supported. They earn the money here, contributing to Australian society and contributing to our economy.

In many cases, these people are here because we have a shortage in particular skills sets and we have supply constraints in the labour markets. They come here and they help us out. They get paid superannuation in accordance with Australian law. It is paid into an account. Some of them—and I acknowledge that, often, it is those who are in higher earning jobs—contribute voluntarily over and above the amount of the superannuation that is being placed into their superannuation accounts on the expectation that they will be able to access that, up until this point, at 60 when they retire. And if they choose to take it out earlier, they would acknowledge that they would have to pay the penalty tax, the DASP. So I do not accept that principle.

If we are going to invite people from outside Australia to come here and contribute to our economy and to work here under our laws, if superannuation is paid to them whilst they are in Australia for work whilst they are here, the concessions that apply to superannuation, when that is paid, should continue to apply to them even if they move out of the country. I also do not agree with the suggestion by the minister that this has wide-ranging implications, because it is the situation that currently applies and has applied for many years. I do not think it has flowed over into other areas during the years that it has been applying up to this point.

I also take slight objection to his suggestion that there is an ongoing cost. I would think that there is a one-off cost here. If this amendment is passed, there is an opportunity cost that is lost in terms of that proportion of temporary residents’ superannuation that does end up being elected to stay in the super funds. But it is not an ongoing cost; it is a one-off thing. It can be quantified, as the minister says, but I also note that he mentioned earlier that he is not sure what proportion is actually lost and what proportion is not.

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

We will get a cost.

David Bushby (Tasmania, Liberal Party) Share this | Link to this | Hansard source

I would be interested to see the cost. It is certainly not $1.2 billion over four years, as you intimated, because I suspect that the vast majority of superannuation accounts from temporary residents who are overseas will not be affected at all by this amendment.

I think we heard evidence on this in the Senate Economics Committee—if not I stand to be corrected—but I think the vast majority will be for small accounts from people who have come here, for example, students, and worked for short periods while they were here. They will have small balances, as I think the minister mentioned. The vast majority of those people have left the country and they will never think twice about their superannuation. They are not in contact regularly with their super fund and they are not actively managing those funds and looking forward to accessing them when they turn 60. The percentage of temporary residents who maintain super funds in Australia and actually actively manage them are fully aware that they are there and stay in contact with their superannuation fund providers, is, I would suggest, probably very small—probably a smaller percentage in terms of actual numbers than dollars. I concede that, because those who are actively managing them probably have higher account balances. I put trust in the Treasury that they will actually have a reasonable guess at this or an estimate when they do put those numbers together, but I am sure that they will show that it is a reasonably small percentage of this $1.2 billion that this measure, without the amendment, is expected to raise over the next four years.

Ultimately, the reason I am supportive of this amendment—and I believe the coalition is supportive—is that it comes back to a simple principle of equity. As I said in my speech during the second reading debate, there is no issue at all where the super is lost in the sense that most people would think of lost super—that is, that the owners of that money have lost contact, they are not aware that the money is there or they have forgotten about it, and/or the super funds cannot find the owners of that money. That is good and appropriate. The purpose of the bill, when the coalition was looking at it, was to scoop all that together and put it into consolidated revenue where, as the minister mentioned earlier, it is easier to access. There are certainly advantages in the bill. We are supporting the bill.

But there is the circumstance where the owners of the superannuation are aware that it is there and they have made a conscious decision, under the laws that apply in this country up until the point where this bill may be passed, to leave it there. There could be a number of reasons: they may come from a nation where investing money in superannuation is not a particularly safe thing to do and they like the stability and the security of a well-managed financial system that we have in Australia or they may have chosen to leave it here, comfortable in the knowledge that we have laws that allow them to access it when they turn 60 years of age. I am very uncomfortable with people being in that circumstance, particularly, as Senator Xenophon mentioned, where they put additional funds in themselves out of their own pockets. But I am very uncomfortable with people in those circumstances losing their rights to manage their funds, in the way that they have been, and losing their rights to obtain dividends and returns over the long term and to grow those funds while they remain in Australia, and, ultimately, losing their rights to access them at the age of 60 on the terms and on the basis they expected.

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

Tax free.

David Bushby (Tasmania, Liberal Party) Share this | Link to this | Hansard source

Yes, exactly. They earned the money in Australia contributing to the economy. Just because they are not permanent residents, I do not see why they should lose their rights to access that. We are not talking about their lifetime savings; we are only talking about what they earned when they were in Australia, and I believe that they should have the right to access that on the terms that anybody else who earns money in Australia accesses it.

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

Again, I will be very brief. We may not get to the vote on this tonight, which may perhaps be for the best because it might cause the opposition to seriously reflect on what they are about to do. The government is not supporting this amendment. It came forward this afternoon and is now apparently supported by the Liberal opposition. We are not supporting it because, if we accept the validity of your point, Senator Bushby—and you appear to be running the debate on this—even if we accept your point, why did you not do this before the election when you announced your policy? Why did you not do it before the election when you announced your policy and you began consultation on the legislation? We have adopted your policy, so we have bipartisan commitments from both sides of politics that did not include this amendment that you are now moving. Even if there is some validity, you should have thought of that before the election. I do not accept the validity of your arguments, but you should have thought of that before the election. You did not. You are now supporting an amendment that is going to cost the government revenue. Think about the current climate we are in. Think about the political position that you have been putting on a budget deficit. I think you should have a long pause for thought about what you are about to do. Frankly, if I were in your position I would be on a hiding to nothing on this one.

This measure is your measure, which you are about to amend at the last minute tonight, and it will cost revenue. It is also a budget measure. It is an election measure that is being supported by both sides of politics. Now we are in an extraordinary position because the Liberal Party, at the last minute, is pushing an amendment in a significant way to cost the budget money. It is amending its own election commitment. If you want to go out and publicly defend this new position, I wish you all the best of luck. I would suggest that Senator Coonan goes to talk to the shadow minister, Mr Pearce, in the other place about all of this before we come to the final vote on this amendment when we get back to it next week. We are giving you the opportunity to think about the consequences of what you are about to do, or what we may not do. But I do not accept your point, Senator Bushby. You did not accept them before the election. I do not believe they have validity in the context of this measure. It is also a budget measure; it is in the budget forward estimates. If you want to go ahead and support something like this you cannot say that you were not forewarned.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

In relation to election commitments made by the coalition and by the Labor Party in the lead-up to the last election, as I understand it—and I am sure the minister will correct me if I am wrong—there was a commitment to deal with the issue of unclaimed super and unclaimed super for temporary residents. We are not talking about unclaimed super with this particular amendment; we are talking about—

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

Correct. Temporary residents.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

But it was to deal with the issue of temporary residents with respect to unclaimed super.

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

No.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

Okay. I can stand corrected. But I think that the coalition made a point in their additional comments. The Economics Committee report on this issue is that the devil is in the detail and the issue here is: is it fair? We are not talking about a bottom of the harbour scheme here; we are not talking about some tax scam. They were putting money in super according to Australian law, working in this country, making additional contributions, as they were entitled to, and now that will be taken away from them or they will be paying DASP—a huge tax slug—even if they keep in regular contact with their super fund and maintain their fund so that it is not lost in any sense. To me, that is fundamentally unfair, and that is what the issue is. I think it is good that we are going to have a few days to reflect on this because I would like to hear from the government as to why it says that it will cost so much. I do not think that I am breaching any confidence by saying that in my very useful discussions with the minister today—and I appreciate the time he gave me to discuss this—I did not pursue the compliance issues. I accepted his arguments because I was convinced by his arguments in relation to that. I did not pursue the earlier amendment that would have covered everyone in relation to temporary residents, particularly in relation to the retrospectivity aspect. But this is for people who keep in contact with their funds and it is still a fundamental issue of equity and fairness. That is why I urge honourable senators to support this particular amendment.

Progress reported.