Wednesday, 23 November 2016
Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016, Superannuation (Excess Transfer Balance Tax) Imposition Bill 2016; In Committee
by leave—In relation to the Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016, I move opposition amendments (1) to (4) on sheet 7980:
(1) Schedule 2, item 15, page 61 (lines 5 and 6), omit the item, substitute: 15 Section 293-1
Omit "$300,000", substitute "$200,000".
(2) Schedule 2, item 17, page 61 (lines 9 and 10), omit the item, substitute:
17 Section 293-10
Omit "$300,000", substitute "$200,000".
(3) Schedule 2, item 18, page 61 (lines 11 and 12), omit the item, substitute:
18 Subsections 293-20(1), 293-155(1) and 293-200(1)
Omit "$300,000", substitute "$200,000".
(4) Schedule 2, item 19, page 61 (lines 14 and 15), omit the item, substitute:
19 Subsection 133-15(1) in Schedule 1 (note)
Omit "$300,000", substitute "$200,000".
We also oppose schedules 3 to 6 in the following terms:
(5) Schedule 3, item 2, page 63 (line 20) to page 65 (line 2), subsections 292-85(3) to (6) to be opposed.
(6) Schedule 5, page 77 (line 1) to page 78 (line 29), Schedule 5 to be opposed.
(7) Schedule 6, page 79 (line 1) to page 80 (line 25), Schedule 6 to be opposed.
With regard to senators having the opportunity to consider these amendments, I acknowledge that they were circulated quite late this morning. I would say, however, that these amendments go directly to the position that the Labor Party announced publicly when we considered the revised government bills, once they had been released. I would like to draw senators' attention to item (5):
Schedule 3, item 2, page 63 (line 20) to page 65 (line 2), subsections 292-85(3) to (6) to be opposed.
Item (5) relates to non-concessional contributions. There is an error in that item. The item as drafted seeks to oppose subsections 292-85(3) to (6). I would like to amend that amendment to reflect opposition to subsection 292-85(2)(a). That is a fault of ours. I am sorry if that is not very clear.
Taken as a group, these amendments implement Labor's position, which seeks to lower the higher income superannuation contribution threshold to $200,000, from the government's proposal of $250,000. We believe there is further room to reduce the higher income cap to that level and also to lower the non-concessional contributions cap to $75,000, to oppose the introduction of the catch-up concessional contributions and to oppose the changes to tax deductibility for personal superannuation contributions. Again, this reflects our view that a system that currently sees half of all superannuation benefits flowing to the top 20 per cent of earners is a system that clearly needs reform.
While the government's superannuation package—and we acknowledged this in the second reading stage—goes some way to reforming these concessions, they could go further. Labor's proposed changes are fairer than the government's and deliver more substantial budget repair. In fact, if our amendments were to be successful they would improve the budget by $1.4 billion over the forward estimates and by $18.9 billion over the medium term. We believe these are sensible. They ensure that superannuation will be fairer and that superannuation tax concessions are targeted to reduce the overwhelming benefit that is provided to higher-income earners and, again, as we said, in the time that we are trying to ensure that there is structural budget repair, that they would contribute more to that, certainly over the forward estimates but also over the medium term. I hope people have been able to follow my amended amendment.
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.
I thank Senator Cormann for assisting there, as we resolve some of the issues around my amendment (5). You are right, Senator Cormann, in relation to what we are seeking to do, which is to lower the annual non-concessional contributions cap to $75,000. We believe that this is a reasonable position to take.
We are mindful of the evidence that shows that only 0.7 per cent of Australian taxpayers made $100,000 or more in non-concessional contributions in 2012-13, and over 86 per cent of taxpayers made no non-concessional contributions whatsoever that same year. That does show, in terms of the capacity for people to put more non-concessional contributions into super, that there is the capacity, if the cap is set at $75,000—along with the concessional contributions at $25,000—for an individual, in any year, to put $100,000 into super savings. Again, it is no surprise that only a very small percentage—less than one per cent—of Australians are able to do this. Just thinking it through: how many people do you know have a spare $75,000 to add into their superannuation savings? It is clearly reflected in the evidence. This proposal would allow people to still put in significant amounts of savings into super, and it would also accommodate those large one-off lump sum payments that some Australians might be in the position to make.
By bringing forward three years of contributions into a single year, the Treasury figures—and these were provided, I think, during estimates and in answers to questions by Labor—show the average contribution for one-off lump sums is $135,000, which is well below the $300,000 that would be allowed under the government's plan and the $225,000 that would be allowed under Labor's plan. By lowering the annual non-concessional contributions cap to $75,000 Labor would ensure the carry-forward allowance remains generous enough to accommodate those kinds of one-off contributions that middle- and low-income taxpayers make but would also do a proper job of cutting back opportunities for higher income earners to gain tax concessions for large annual contributions—something on which, we believe, there is further room to move in relation to the positions being put by the government and by Labor.
Through these amendments we are trying merely to reflect the position that Labor has taken publicly, as I said, around the positions that we have outlined in our budget. It has not been an ideal to work through the amendments, as everyone has been very busy this week—particularly with registered organisations and the drafting of amendments for that—and this has led to this issue that we are trying to resolve at this point in time. What I would like, if I need to amend my amendment (5), is to have that merely reflect the position of Labor's position of lowering the non-concessional contributions cap to $75,000.
The first measure that comes to mind that supports women is one that you oppose. The most important measure in this package is one that enables Australians who have not used the fully available concessional contribution cap to play catch-up on their retirement savings. The evidence is overwhelming that this is something that predominantly supports women. Another measure that is very good for retirement savings, in particular those of women, is the one that improves the flexibility for all Australians to make tax-deductible personal contributions. It is something that, again, Labor has decided not to support.
You mentioned the government's decision to introduce the low-income super tax offset as something that you also recognise is a very good feature of this package for women, and you suggested that this is just copying the Labor Party policy. The problem with Labor's policy at the time was that it was not funded. Labor put this particular low-income super contribution measure in place as part of its mining tax package, saying it would be funded by the mining tax, which ended up raising no money. In fact, it ended up costing the budget bottom line money.
We have put forward a package of measures which is designed to make the system fairer and more sustainable. It is a package that we believe goes some way to making the system fairer and better for women across Australia. You will say that there is more that can be done, and we would agree that in the months and years to come we should continue the conversation. But a very good start today would be for Labor to support our proposals to enable Australians to play catch-up on their retirement savings and our proposal to enable tax-deductible personal contributions to be made, as well as the reintroduction of the low-income super tax offset.
If you could be more specific about that, I would appreciate it. During the estimates process we questioned departmental officials about whether a gender analysis of the impact of the package has been undertaken, and they told us that it has not. Given that that is the case, what other evidence, specifically, are you relying on in relation to your assertion?
It is a matter of public record—and I am surprised that we even have to have the conversation—that women across Australia have on average lower superannuation balances. It is a matter of public record, when it comes to disrupted working patterns, that that is something that is particularly an issue confronted and faced by women, whether it is in the context of caring for children or caring for an elderly parent. You are essentially suggesting that this is not so when the reality in the economy is that every Australian knows it is so. You ask what the evidence is. Talk to the women of Australia. They will tell you that that is a challenge they are facing. The women of Australia will tell you that they would appreciate the opportunity to be able to play catch-up on their retirement savings when the opportunity arises.
Labor argues that this catch-up provision will be utilised predominantly by high-income men, yet this analysis is based on contribution patterns of the past. What the government is doing is setting the superannuation system up for the future by making it more flexible going forward. When the law changes you can reasonably expect taxpayers' behaviour to change, and that is what we fully expect to occur as a result of this measure. And, based on Treasury figures, approximately 230 Australians will benefit from this change in 2019-20. Based on everything that we know about the current status of superannuation savings in Australia, our expectation is that this will significantly improve flexibility and fairness of the system for women
As we have previously indicated, we do not have that breakdown, but it is self-evident that this is a measure that particularly favours women. You are entitled to vote against it. That is, of course, your right. You have already indicated that you are voting against it. I think we are now really just wasting time.
I do not think that questioning the value of this package, when there are explicit assertions in the public domain about it being a package for men, and questioning the basis of the analysis of which those assertions are being made is wasting time, and I do not think Australian women will believe that that is the case either. You indicated that your modelling does not allow you to tell us how many of those 230,000 people will be women. Do you know what the average income of those 230,000 people might be? The reason I ask this is that at the moment, even without the measure that you propose, it is possible to put up to $25,000 a year into your superannuation on a concessional basis. I do not think that many women in part-time work returning from maternity leave or a period out of the workforce have a lazy $25,000 or more that they seek to put into their retirement. I just do not understand what analysis you can possibly have that suggests a behaviour changed that will see such a very significant change in behaviour for women working in low-income jobs.
I am really surprised at the nature of this conversation given that there has been an inquiry through a Senate committee into these bills, which delved into these sorts of issues in some detail, and given that there has been—as you suggest, Senator McAllister—the opportunity at various Senate estimates committees to delve into these questions in some great detail. I am also surprised that you would not recognise that women across Australia today have greater breaks from the workforce, that women in Australia today have more variation in their income and that women today have lower balances than men. And that is why we put it to you that there is more room for women, proportionately speaking, to make catch-up contributions.
Catch-up concession contributions, as I have indicated, will help around 230,000 people according to the information that we received from Treasury in 2019-20. The take-up and cost of this measure will be dependent on behavioural responses from individuals. But what I will again point out is that women typically have lower account balances than men. Of the individuals estimated to have an account balance of more than $500,000 in 2018-19, only 37 per cent are women. Of the 14.4 million account holders with balances less than half a million in 2013-14, 47.3 per cent are women. Women make up 46.9 per cent of all account holders; 96.8 per cent of female account holders have balances less than half a million compared to 95 per cent of males; and average balances in 2018-19 are expected to be around $108,000 for females and $141,000 for males.
Given the pattern of greater breaks from the workforce for women and the pattern of more significant variation in income for women, we believe that the additional flexibility that comes with being able to play catch-up on retirement savings that would come with this particular measure is particularly beneficial for women. You are entitled to take a different view. You are entitled to move your amendment. You are entitled to seek support for your amendment in the chamber. The government, as I have indicated, will not be supporting it, but in the end we might have to agree to disagree.
You obviously did not listen to my previous answer. The first and the most important difference is that, under the government's package, it is actually fully funded, because you know that the superannuation package, overall, actually delivers an improvement to the budget bottom line even after we introduce the low-income superannuation tax offset, whereas Labor said that it would fund its proposal to introduce the so-called low-income super contribution through, initially, resource super profits tax, which was then morphed into the minerals resource rent tax, which we said all along would not raise any money and which in the end did not raise any money. The money that it initially raised had to be refunded because of the way the deal was very badly structured by then Prime Minister Gillard and then Treasurer Swan, something that we asserted all the way through. In the end, only the Labor Party is able to come up with a supposedly multibillion dollar new tax which leaves the budget worse off. Having spent all the money they thought it would raise, and more, we had a situation where not only have they created massive uncertainty for an important industry for Australia and for investors in that industry, they left the budget worse off to the tune of billions and billions of dollars.
The government has worked over the last three years to put our budget on a more sustainable foundation for the future. We have pursued reforms that now enable this to be afforded in the context of this package. We are structuring it as a tax offset recognising that we do not want people at low income levels to end up paying more or the same level of tax as if they took their income as take-home pay. You structured it as a payment; we are structuring act as a tax cut. That is the technical difference, but the most important and fundamental fiscal difference is that, unlike the Labor Party when you were in government, we have actually found a way to pay for it.
Minister, you mentioned the changes to tax arrangements for high-income earners as one of the elements of the package that benefits women. Have you done any modelling or analysis on that? We have talked a little bit about the LISC, the LISTO and the catch-up contribution measure. What are the other measures in the package and can you talk about the analysis that supports your claim that they benefit women?
I always pride myself on being as helpful as I possibly can be, but I feel that this is now getting quite repetitive, because I did take you through that list in response to an earlier question. It is a sign of my respect for your particular interest in this matter that, unlike when other senators go through repetitive questions like this, I am prepared to go there again.
As I have indicated, the government is introducing a range of superannuation measures that ensure that the superannuation system is accessible and relevant for all Australians. Many working Australians, especially women, take time out of the workforce to raise children or care for an elderly relative. Women spend twice as much time in unpaid work as men. This contributes to women having lower lifetime earnings and, therefore, lower superannuation balances. While women are most likely to experience interrupted work patterns, they also have a longer life expectancy than men and need higher superannuation balances to support a longer retirement.
This is why the government is introducing measures to boost women's superannuation savings. You have mentioned the low income super tax offset, as I have. This will support the accumulation of superannuation for low-income earners by avoiding the situation of paying more tax on savings placed into superannuation than on income earned outside of superannuation. In addition, the government will extend the current spouse tax offset to help more families to support each other in accumulating savings. The current 18 per cent offset of up to $540 will become available for any individual, whether married or de facto, contributing to a recipient spouse whose income is up to $37,000. This is an increase from the current income threshold of $10,800. The new income test for the recipient spouse will be $37,000 for the full offset, retaining the current $3,000 phase out with the offset zeroing out at $40,000.
From 1 July 2017—we have also discussed this, of course—any unused concessional superannuation contributions amount will be able to be carried forward on a rolling basis for up to five years for individuals with super balances of $500,000 or less—predominantly women. Together with existing measures, such as the government's co-contribution scheme, these changes will assist many working Australians, especially women who have low incomes or who take time out of the workforce to raise children or to care for an elderly relative. I would also say that the opportunity to make tax-deductible personal contributions and the additional flexibility that this provides for Australians across the hospitality sector and other sectors is something that we believe will also improve the flexibility of superannuation arrangements for women.
In your contribution earlier today you indicated that you do not have a gender breakdown of the take-up of the catch-up contribution measure. Do you have gender breakdowns for the estimated take-up of any of the other measures?
Minister, you have indicated that you believe my questioning to be tedious and repetitious, but the reason I am asking again—and I have asked many of these questions of your officials in estimates before, but I am asking you now—is that I am actually very concerned that in this and many other economic measures that are developed by the Treasury and the other economic agencies of government we do not have information about their gender impacts.
You yourself have acknowledged in your remarks that women get the rough end of the deal on a lot of economic questions in this country. They have lower wages and lower superannuation balances; they have less secure retirements; they are more likely to live in poverty. There are a range of ways that our economic arrangements, which are absolutely supported by government, are unfair and produce very wide disparities in the experience of women and men in the economy and their ability to enjoy a comfortable standard of living whilst working and after work. Are you comfortable with the present practice, which is not to provide information to you as a decision maker about the gender impacts of economic proposals?
I do not accept the proposition that has been put. I have very concisely and very directly addressed why the government is of the view that our superannuation reforms make the system fairer and more sustainable, in particular for women, and which measures will help achieve that and why. I have very explicitly and very directly addressed that point. As I have also previously indicated—and I say it very directly in black and white again—gender splits on measures like this are very difficult to put together because they are reliant on behavioural responses. The gender distribution of behavioural responses is highly uncertain. That is why we are not able to provide an overall gender split of those affected across the measures that you have asked me questions about. While you might want me to put the thumb in the air give you a number, it would not be honest.
I have explained to you very directly why we believe these measures, including measures that you propose to oppose, will make the superannuation system better and fairer for women. We believe it is based on very good information. We believe it is an accurate prediction that we are making. But, in the end, once these measures are in effect and have been in effect for some time, we will be able to review the impact that they have had. We will be able to review over time how the data on superannuation has evolved. To make these assessments prospectively about future behaviours is nigh impossible. What we can do is we can see where we are now and we can make a judgement on where we would like to be. In a few years time we will be able to make an assessment on whether we have made the sort of progress that we thought we would make, that we wanted to make, and then we can make a judgement on whether further adjustments need to be made in order to address the issues that Senator McAllister quite rightly points to.
I acknowledge and thank the committee for allowing us to resolve some of the issues with my amendment (5). In particular, I thank Senator McAllister for stepping in and asking some of those questions to the minister. I originally moved my amendments as a group of amendments. I would like to withdraw amendment (5), put the other amendments together and then deal with the issues around amendment (5) separately once we have dealt with those other issues.
Alternatively, to facilitate, if it helps, you could seek leave to just amend that part of the amendments that have been moved as a whole in the way that you would need to amend it. That way we can continue to deal with them as a whole, but the government is happy to facilitate for amendment (5) to be adjusted accordingly.
Oh, they have gone around, okay. This is called doing it on the run. These three amendments deal with the difference between the government position on the non-concessional cap being set at $100,000 and the opposition position that it should be set at $75,000. There are some other consequential transitional arrangements which are impacted by lowering the cap to $75,000, which are dealt with in Nos 2 and 3 of my amendments to amendment (5). I know that is very confusing, but it is absolutely straight down the line implementing our position on the $25,000 difference between the non-concessional cap, and I do acknowledge the minister and indeed your officials for assisting us with that. It has not been an ideal arrangement for dealing with these amendments; I do accept that. It has been very rushed. The Senate office has been very constrained with other commitments this week, and these amendments as finalised were not available until late this morning, which has compounded some of the issues that we have been dealing with on the floor, but I do accept everyone's willingness to cooperate and to ensure that the amendments as put to the committee reflect the policy position that we have taken, which is around lowering the annual non-concessional cap to $75,000 and subsequently amending sections of the bill which deal with the transitional arrangements to that lowering of the cap.
As a servant to the people of Queensland and Australia, I need to speak up for my constituents after both Liberal and Labor speakers, and particularly after Labor's amendments. I acknowledge Senator Gallagher's open admission that this is 'doing it on the run.' My comment is not a reflection on her but on the system. In fact, this is an extraordinary bill to be introduced by a supposedly Liberal government. In fact, peering beyond the verbiage, one can be forgiven for thinking that this a bill being introduced by a Labor-Greens government. This is because it penalises the thrifty and hardworking to subsidise the lazy and the feckless, and this is being hidden by an increasingly complex system. This is simply a tax grab for the now, a short-term sugar hit and bandaid at the expense of medium- to long-term savings, investments and jobs.
This confirms yet again that our potentially abundant nation is being crippled by economic mismanagement and that this has been the case, sadly, for years. This bill is a dog, and all the amendments are just making it a different species of dog. A government that seemingly lacks the strength of will to cut spending is instead raising taxes. Does that sound like a true Liberal government? Rather than solving the long-term problem of an ageing population increasingly burdening the welfare system, in order to raise a relatively small amount of revenue in the short term this legislation will actually increase the future burden expected to be placed on the welfare system and on our children and grandchildren. Those who are striving to provide for themselves in old age are being kicked in the guts so that the government can continue the Gillard-Rudd-Milne government's profligate spending.
This legislation is yet another bandaid on a repeatedly amended superannuation legislative tangle of byzantine complexity. What is desperately needed is a coherent policy reflecting the philosophy that hard work and thrift should be rewarded. I previously thought that the Liberals believed in this, yet this legislation before us attacks the interests of working, everyday Australians and, worse still, contributes to the long-term problem of growing dependency on the age pension.
Pauline Hanson's One Nation believes in rewarding hard work and thrift and in safeguarding the superannuation savings of everyday Australians. We argue that what is needed is a replacement of this dog's-breakfast approach with a superannuation policy akin to the United Kingdom pension system in which contributions from taxpayers are quarantined from general revenue and pensions are paid without means or assets tests in addition to, not instead of, any additional superannuation savings.
Superannuation in this country was intended to replace the age pension. The Hawke government introduced the superannuation guarantee levy to this end because it recognised that an ageing society would progressively place greater and greater burdens on the social security system. Yet there are people rorting the system. That is what happens when government regulates to control people's behaviour. It is a fact. The system as it now stands is broken. It has been broken by successive governments looking for sugar hits at the expense of the people. Just who do these political elite think they are?
Responsible financial governance is nonexistent. The Treasurer in recent weeks admitted that the backpacker tax provisions were proposed without a cost-benefit analysis. We as a nation under Labor-Greens and Liberal-Nationals have wasted tens of billions of dollars on so-called climate initiatives without any cost-benefit analysis. We need to quarantine people's savings from the avaricious clutches of a spendthrift government buying short-term votes through bogus promises while avoiding hard fiscal decisions. The impacts of years of pandering to the Greens are now coming home to roost.
This is our money—the people's money. It is people's hard-earned money. The fact that the ATO is the keeper of these funds tells us all we need to know. People need the reassurance that comes from rules that are consistent and unchanging. Yet, instead, every government changes the rules when we need people to save and be rewarded for their saving. It is no wonder that I am told this morning that a retailer at home safes storage says safe sales are quadrupling. The system as it is now is so filled with jargon. We are supposed to be simplifying it, yet it becomes ever more complex and makes people more dependent on the advice of professionals and funds leeching fees.
People's longevity is increasing, and we need to plan for a system based on hard data and empirical evidence. Super was designed to encourage savings for investment. Next year—and I would invite other parties to join us in this—forums will be held around the country by our party so that we can listen to people's needs and get the data. All we know now is that the system is being destroyed and that our country's tax system is being crippled.
We must turn our attention to the tax system because it is destroying our country. Why, for example, do we tax employment? We in our country all know that when something is taxed its usage is reduced. So why do we tax employment? We tax employment through PAYE schemes. So when a company has just paid a certain amount of net income increase then they are actually paying the total on top, which adds an enormous burden because that is a disincentive to employment. Then we have a direct tax in the states on payroll.
Jim Killaly, the former deputy commissioner for taxation for large companies in international matters, said in 1996 and in 2010 that 90 per cent of Australia's large companies are foreign owned and since 1953 have paid little or no company tax. Just doing rough figures indicates that that could earn us $100 billion a year in taxation revenue.
The Australian Bureau of Statistics in the late 1990s and early 2000s said that for a person who is earning the average annual income 68 per cent of their income is spent on government. Sixty-eight per cent goes to government in the form of taxes, rates, fees, levies, charges and special charges. Our taxation system currently levies fuel at an effective tax rate of 230 per cent. Our taxation system currently levies an effective tax rate on a loaf of bread at around 100 per cent. Similarly for housing it is around 90 per cent.
We could fix the budget black hole and reduce the tax burden of everyday, hardworking Australians with a simple, comprehensive review of our taxation system. We could fix the debt with a simple, modern, fair, efficient tax system. We cannot keep limping along with the current dog of a tax system and the current dog of a superannuation system. We need a comprehensive review, not the fiddling on the run that is coming to us from the major parties and the Greens. Simply increasing tax is not a solution. That is destroying this country. We need to listen to the people. We need to come up with a simple tax system and a fair, efficient and honest tax system. We are blindly stumbling around the real issue, and that is tax. We need to make Australia great again for everyone.
The CHAIR: The question is that opposition amendments (1) to (5), as amended, on sheet 7980 be agreed to. Just to be clear, that includes amendment (5), as circulated, on revised sheet 7980, and the two additional amendments circulated on separate sheets.
by leave—I move Greens amendments (1) and (2) on sheet 7986:
(1) Clause 2, page 2 (at the end of the table), add:
(2) Page 135 (after line 24), at the end of the Bill, add:
Schedule 12—Review of operation of Act
30 Review of operation of Act
(1) Before 1 July 2017, the Minister must cause to be conducted a review into the operation of the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016.
(2) The review must consider how the superannuation changes in the Act will affect housing affordability for aspiring first home owners.
(3) The Minister must cause to be prepared a report of a review under subsection (1).
(4) The Minister must cause a copy of the report to be tabled in each House of the Parliament within 15 sittings days of that House after the completion of the preparation of the report.
This is fairly simple. The Greens have raised the issue repeatedly in relation to legislation on the economy that we want to see the crucial issues and moral challenges we face addressed in every piece of legislation that comes to parliament.
Senator Cormann was present when I raised the issue with the Secretary of the Treasury, John Fraser, in the last estimates about what the government and Treasury were doing on issues like housing affordability for young Australians. The Treasury secretary agreed that this was a significant issue in this country and that more needed to be done. He said it was a complex issue and he made some statements, which of course were reported in the media about parents becoming 'the bank of choice' for their children because children were not able to afford houses, especially in places like Sydney and Melbourne.
My point to the Treasury secretary was a simple one: how do we better prioritise issues like housing affordability for young Australians? How do we have a process or a discipline where everything we do is viewed through the prism of things like housing affordability? In the last inquiry we had on the omnibus bill I raised the same issue, and Senator Cormann would be aware of that. We also looked at inequality of gender pay, and I am glad that Senator McAllister spent some time today going through issues on gender equality in this bill.
Senator Cormann, what the Greens are asking for in this amendment is that before July 2017 the minister must cause to be conducted a review into the operation of the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016. For anyone listening, that is the bill we are currently debating and looking to pass through the Senate. The review must consider how the superannuation changes in the act will affect housing affordability for aspiring first-home owners. The minister must cause to be prepared a report for review under subsection (1) and the minister must cause a copy of the report to be tabled in each House of the parliament within 15 sitting days of that House after the completion of the preparation of the report.
Now, why am I asking for housing affordability to be included in this legislation package and how is it relevant? While we see it as a good thing that this legislation at least goes some way to reducing the tax rorts that are enacted through our super system by people taking advantage of superannuation concessions to avoid paying tax and to maximise their wealth, and while we are making some inroads into that with this bill, a potential of that—I do not think an unlikely or improbable unintended consequence—will be that wealthy Australians, especially the most wealthy Australians, who will be impacted by today's legislation will seek to put their money elsewhere. What other tax shelters or tax incentives are we offering wealthy Australians in terms of where they can put their money to minimise their tax, especially in the field of investment, because that is really what we are dealing with here.
Superannuation is an investment in all sorts of forms. We are very concerned that, if we start tightening the screws for wealthy Australia, which we should be doing, we also need to be cognisant of the fact that that money may find its way into the housing market—an already overheated housing market, especially in Sydney and Melbourne—with a crisis of affordability for low-income Australians and for young Australians. How do we know that this money is not going to prop up the bubble in real estate in this country and lead to rising inequality?
What we are proposing is fairly simple: we would like the minister to take on board that we would like a review into whether this will have any impact, similar to what I moved in the second reading. What we see at the moment are tax breaks in the form of superannuation, with people using superannuation funds; tax breaks in the form of capital gains tax concessions, with people not paying the full capital gains tax on property investment; and tax breaks in the form of negative gearing, especially when negative gearing is combined with capital gains tax breaks to provide an incentive for investors to invest in housing to avoid paying tax and to maximise their wealth. We are concerned about these tax breaks in real estate. We do not want to see more capital diverted into existing housing stock, making it even harder for young Australians to buy their first home and further entrenching inequality between generations. We call on the government to undertake this review. Minister, I do not think it would be a difficult thing to do. Will you give it consideration?
The government will not be supporting these amendments. The Greens are asking the government to conduct a review into these bills before they have come into effect. There has already been a review of the bills by the relevant Senate committee before they are to come into effect. Down the track, after the bills have been in place and after this legislation has been in effect for some time, if the Senate chooses to pass it, I am sure our government or future governments will have another look at how these reforms have benefitted people across Australia with a more flexible, sustainable and fair superannuation system. But the time is certainly not, in the government's view, the time suggested in this Greens amendment.
The Labor Party will not be supporting this amendment either for a similar reason, which is around the commencement of the review. It is difficult for a review to be conducted into the operation of an act where substantial parts do not start for another year and other parts will either have just come into effect or only have been in effect a number of months. Having said that, I think it is incumbent upon all of us to continue to look at and assess how our tax laws are operating and at any distortions or changes in behaviour that may be occurring because of legislative reform. That is part of our day-to-day responsibility, and we will continue to make sure that superannuation tax concessions are fair and sustainable for the long term.
In relation to the issues about housing affordability: I do not disagree with Senator Whish-Wilson. There are significant issues affecting people's ability to afford housing, particularly for younger people and people on low-to-moderate incomes. I think that is an issue that the Senate has looked at through various committee reports and that we took policies on to the election—negative gearing and capital-gains-tax exemptions. Again, I do not disagree with the concerns that Senator Whish-Wilson has raised, but I would question whether or not an amendment to this act is the right place to pursue those concerns.
Certainly the Labor Party will continue to work with other senators who have an interest in addressing housing affordability and the current tax arrangements. We have made our position on that very clear, but I do not think an amendment to the Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016 is the right place to pursue that particular issue.
On behalf of my colleagues senators Kakoschke-Moore and Griff , I indicate that we do not support this amendment. I understand and commend Senator Whish-Wilson for moving this amendment but I think we should see how these changes operate. There is nothing to preclude a review or an inquiry by the Senate economics committee towards the end of next year. If I could be indulged very briefly for 60 seconds or 90 seconds: we have not supported the other amendments and I foreshadow that we will not support the amendments moved by the Greens and the ALP for these reasons. We think the government has come up with a compromise package of an extra $3.1 billion in revenue. This is a very vexed and hard-fought area. Of course, the ALP, as the alternative government, can take these matters to the people at the next election.
In terms of the catch-up contributions, to allow catch-up contributions for up to $500,000 is not unreasonable. In terms of the flexibility measure—what some colloquially put as the tradies measure—work arrangements in Australia have changed very much over the years. There are 800,000 people that this would apply to that are contractors in addition to a full- or part-time job where they are getting an income. This would make it easier for them to get to that $1.6 million benchmark or threshold.
The government is already reducing the high-income super threshold from $300,000 to $250,000. I think they have stepped out in a reasonable way. I think there is always scope to improve. We do not support the Labor amendment lowering the high-income super threshold from $250,000 to $200,000, or limiting the after tax contributions to $75,000 from $100,000. We think that a compromise has been struck. Of course, these issues can always be reviewed, but $3.1 billion in revenue will be raised from this and I think that that, on balance, strikes an appropriate public policy response at this stage. But, of course, these are things that ought to be looked at.
In terms of housing affordability, Senator Gallagher is right: these are major issues that need to be addressed. I think it will take not a bipartisan but a whole-of-parliament approach to address these issues. It is not just about super; it is about capital gains and other measures that we need to look at for housing affordability, and even some innovative measures we have seen overseas, including one that none other than Ronald Reagan—that right-wing conservative warrior—introduced in the eighties. Successive administrations, including the Clinton administration, have embraced that measure, and it has had a dramatic effect on low-cost affordable rental accommodation for many hundreds of thousands of Americans. That is the sort of innovative approach we need to look at.
Senator Cormann, you understand finance and how things work. People go to their financial planners and they speak to their accountants. Some of them do not need to—they are very sophisticated, especially very high-income Australians. We are asking for a review in about nine months time. People will anticipate this legislation. They will make changes to their financial planning well before then. They will not make the changes after the bill has kicked in when they have changes to their contribution caps; they will make changes prior to that. So I think a review is very reasonable, but we would be happy to amend it to 2018, if you felt that that was more reasonable. Either way, we would like to see a review into these matters.
I am disappointed that Senator Xenophon and the Nick Xenophon Team have not supported this amendment or Labor's amendments to this superannuation bill. What we discussed in committee and what has been a theme certainly for the Greens here today—and I note the same for Labor—is that this is an opportunity to go a little bit further. This is an opportunity to reduce perverse tax incentives that are allowing wealthy Australians to use superannuation as a tax avoidance vehicle. We are not asking much. I would like to have seen the amendments go a lot further and I would like to have seen the superannuation system be made a lot more progressive with significant reform that would have raised a lot more revenue for this counter and made it a lot fairer.
I suspect that the Nick Xenophon Team have been asked not to vote for these amendments because they might actually pass and we might have the numbers to amend this bill and send it back to the House. Those are just my own thoughts on the matter. Nevertheless, I do not think Senator Xenophon's case for not voting for Labor's amendments or the Greens' amendment is very strong at all. We have an opportunity to raise more revenue here, which would take pressure off backpackers, off wine producers and off other low-income Australians, who the government is intent on taking money off all the time. We can actually take some money off wealthy Australians here, raise revenue and have some real reform, and I think the amendments being put up by Labor are quite reasonable and help make this system just a little bit fairer. I just wanted to get that on record.
Bills reported without amendment; report adopted.