Thursday, 14 February 2019
Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018; Second Reading
I rise to speak in support of the Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018. The government has been working tirelessly to ensure that more of the money earned by Australians stays with Australians. That's not surprising, really. Everything this government does is about helping Australians do more with their lives and make more of their own choices with their own money. Whether this has been through tax relief for low- and middle-income earners, the reduction of small-business taxes or the extension of the instant asset write-off, this government has been working hard every day to make sure that Australian taxpayers can keep more of their hard-earned money. That's because, unlike the Labor Party, we recognise that government revenue is not our money. It's never our money. It's the money of our constituents. It's the money of working Australians. The 'protecting your super' package is just another example of this Liberal-National government working hard to put more money back in the hands of Australians.
In light of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, these reforms are more necessary now than ever. The royal commission revealed that a number of our large superannuation funds have admitted to charging consumers fees for no service. For instance, AMP admitted to charging fees for no service with regard to superannuation products. Senior counsel assisting the commission, Michael Hodge QC, said a number of super fund trustees have also admitted misconduct or possible misconduct concerning fees for no service. He also said the National Australia Bank superannuation trustee NULIS has acknowledged it engaged in misconduct or conduct falling below community standards and expectations in relation to superannuation.
Public submissions to the royal commission about superannuation have raised concerns about fees for no service, as well as the provision of insurance by super funds that consumers have never sought. Our comprehensive 'protecting your super' package will stop people being ripped off in the superannuation sector, providing significant benefits to the financial security of millions of Australians. That benefits everyone, but it particularly benefits young people and women. For example, around two million women who hold low-balance, inactive accounts will be protected from erosion through excessive fees and inappropriate insurance. This is more common a problem for women than it is for men because there are many women who work a number of different part-time jobs, particularly during the parts of their lives when they are balancing the caring of children with work. Around six million women who are still contributing to low-balance accounts will see hundreds of millions of dollars worth of savings in total, and three million women will have their retirement savings boosted by a total of around $2.5 billion. I will say that again: $2.5 billion. That's thanks to being proactively reunited with their lost or inactive low-balance accounts.
Our 'protecting your super' package achieves this in a variety of ways. For example, schedule 1 will provide greater fee protections so that unfair charges don't eat away at superannuation. In a compulsory superannuation system the government has an obligation to protect members against excessive account erosion. Currently, low-balance accounts face disproportionately high fees and are at risk of erosion, particularly when they're in an account that charges flat fees for an account receiving small or no contributions. That's quite a common thing when a person has had a number of jobs or moved from one job to another and had a new account opened at the time of commencing each new job. When that occurs, the account relating to previous employment often receives no more contributions, but the fees keep ticking on and they aggregate swiftly. The impact upon superannuation balances at retirement ends up being quite enormous over the course of a working career. Under current arrangements, there are no special protections to prevent low-balance accounts from being eroded all the way down to zero.
In 2013, as part of the MySuper changes, Labor, through a decision made by the now Leader of the Opposition, repealed the member protection standards. These standards had protected accounts below $1,000 or accounts held in eligible rollover funds from erosion by requiring that fees not exceed investment earnings. That was a protection in place but in 2013 Labor took it away. The impact on balances has been significant.
Our superannuation package will introduce new requirements to prevent trustees of superannuation funds from charging administration and investment fees and prescribed costs exceeding three per cent of the balance per annum for accounts below the sum of $6,000. Based on the most recent data, it's estimated that around seven million Australians will save around $570 million just in fees just in the first year thanks to these reforms. Think of the aggregate impact of those fees being in the pockets of Australians when they are invested over the course of a working career. We're talking tens of thousands of dollars of difference at the time of retirement. For some people, the impact will be in the hundreds of thousands.
The measure also prevents trustees from charging exit fees on all superannuation accounts. That removes a disincentive for people to take the step of consolidating their accounts, and that's important because it should be the case that a consumer can choose easily and freely where they want to invest their superannuation savings. According to data from APRA, approximately one-third of superannuation funds charge exit fees. As at June 2017, the average exit fee disclosed by superannuation funds for MySuper products was $68, with total exit fees collected across the industry totalling $52 million.
In totality, these measures will help protect erosion of low-balance accounts by high fees and will remove a significant disincentive for members of the Australian community to consolidate their accounts, rolling them over into a single account that works best for them.
Schedule 2 of the bill has an important purpose too. It will work toward tailoring insurance arrangements. The current system requires the provision of default insurance for MySuper members. Default insurance can result in members paying for insurance cover that they aren't aware of, that to their mind they didn't ask for, that goes beyond their needs or which is so inappropriate for their own life or lifestyle that it means they can't, in fact, claim on it. That's not good for consumers. That's a policy that plays into the hands of and serves the superannuation industry and the insurance industry over the needs, the aspirations and the interests of Australian working people.
Insurance premiums can reduce low-income earners' retirement balances by 10 per cent or more, and that increases; it multiplies with every additional policy that is held by an individual. Schedule 2 to this bill prohibits trustees from providing insurance on an opt-out basis to new members who are aged under 25 years, to members with account balances below $6,000 and to members with inactive accounts, unless the member has directed otherwise. This is good. It puts responsibility and choice to take out insurance into the hands of Australians who hold these accounts, but it doesn't penalise those people who, in the busyness of their lives, don't pay all that much attention to their superannuation, particularly in the younger years of their life.
We'd all like people to pay more attention to saving for their retirement. We'd all like people to engage more with the process of selecting superannuation and insurance products that work for them. While we work towards that, we also have to accept the reality that there are many Australians who, at this point in time, are disengaged. This package offers a protection for people who have a low balance, because the insurance premium, which, as a percentage of the balance, is disproportionate to that which someone with a much higher balance would have. It protects people with a low balance from having their balance overly eroded by these insurance premiums. It protects people under the age of 25, who often move from job to job as they find their place in the workforce or as they juggle part-time jobs while they start out in their career or while they are studying. It makes sure they're not exploited by being co-opted, really, against their own understanding, into insurance policies they just don't need.
The changes in this package aim to better target default insurance and minimise balance erosion due to insurance premiums, particularly for individuals who have duplicate insurance cover through multiple accounts. Importantly, these changes don't prevent anyone who wants insurance from their superannuation from being able to get it. Low-balance, young or inactive members are still able to exercise their right to opt in to their insurance at any time through their superannuation account. The impact of these changes is huge. It's estimated that these changes will benefit around five million Australians, who will have the opportunity to save an estimated $3 billion in insurance premiums by having the choice to opt in to this cover rather than just paying for it by default.
Schedule 3 of the bill reforms the ATO lost and unclaimed superannuation money regime. Madam Deputy President Lines, I'm sure you have experienced this yourself and you're familiar with how it works. If you want to reunite yourself with a past superannuation account that's now in the lost and unclaimed section of the ATO, you need to take active steps to do that. There's a process of logging in or completing forms in order to reunite lost super with a tax-paying and superannuation-saving person. The current regime for transferring lost superannuation balances to the Commissioner of Taxation to protect them from erosion requires long periods of inactivity before those amounts are transferred. The impact of that is that the Australian who owns that account has more and more fees eroded by the time that account is ultimately marked inactive, moved to the ATO and placed in the position where it can be claimed. That's replicated once you also start deducting the impact of insurance policies. In addition, numerous exceptions permit trustees to avoid transferring balances below $6,000 to the ATO, allowing these balances to be subject to ongoing erosion all the way down to nil. Under schedule 3 to this bill, from 1 July 2019, all inactive accounts without insurance cover below $6,000 will be protected from further fees and charges by being transferred to the ATO. For the first time, the ATO will also be empowered to proactively return these amounts, along with existing unclaimed superannuation moneys it already holds, to an individual's active account, provided that the combined balance of the consolidated account would exceed $6,000, the member is still alive—that's pretty important—and the ATO is able to transfer the funds to the identified account. The ATO estimates that, on average, it will be able to reunite an amount it holds to its rightful owner within a month of receiving those funds. It's estimated that in the first year of operation this new system will see around $6 billion reunited with the active accounts of around three million members.
The reforms will help individuals who have been forced to hold multiple accounts as a result of restrictions on superannuation choice—restrictions which we propose to lift and which the opposition to date has refused to support. But why shouldn't it be a choice that is in the hands of each and every Australian? Choice is what we are all about. Currently, lost and unclaimed accounts must be requested from the ATO in writing or through the myGov platform, as I've mentioned already. This new process will supplement that existing account consolidation process, which will remain available for those who want it, and it will add an additional service for the Australian people, actively reuniting people who might be disengaged from their financial affairs but who nevertheless are entitled to that portion of their wage which has been saved as superannuation.
While our reforms to super will ensure Australians are left with more money for retirement, the Labor Party wants to hit working Australians not just with fees, not just with insurance premiums but with four new super taxes. These four new super taxes will punish Australians, taking away their savings processes through superannuation. They will abolish the flexibility afforded by the government's catch-up contributions, which allow yearly caps to be carried forward up to five years. They will hit mothers returning from maternity leave and those working in jobs where their income may fluctuate, such as in the tourism or hospitality sectors. They would abolish tax deductibility for personal superannuation contributions, particularly hurting the self-employed. They would hike taxes on superannuation contributions by lowering the non-concessional annual contributions cap from $100,000 to $75,000. And, if all of that wasn't bad enough, they would lower the high-income superannuation contribution threshold from $250,000 to $200,000, on which 30 per cent tax is paid on the contribution, rather than 15 per cent.
Based on Treasury estimates, the combined impact of those policies will hit around one million workers, given each of the four policies would hit around 230,000, 800,000, 17,000 and 130,000 Australians respectively. At the same time, Labor's retiree tax will hit those with self-managed super funds. Two hundred thousand self-managed super funds will lose, on average, $12,000 a year, with many people losing much more. Rather than listening to the genuine concerns of retirees across the country, Mr Shorten and Mr Bowen have dismissed them. They've simply refused to talk to people who have approached them sincerely, pleading for them to not proceed with such a destructive measure.
The choice could not be clearer. Under the coalition government, every day of the week you will pay less tax and you will keep more of your hard-earned money for retirement. You'll get help through those early or disruptive parts of your career when superannuation accounts can become higgledy-piggledy. We'll help you get them all back into one place. We'll help you save money on your fees. We'll help you make sure you're not paying for too many insurance policies you just don't need. But with Labor you'll get $200 billion worth of new taxes and less money to spend in your retirement. Only the Liberal-National government will protect the earnings of Australians, because, after all, we know, and we'll never forget, that it's your money—not ours, not the government's. It's the hard-earned money of working Australian people, and they're entitled to keep it.
I rise to talk to the treasury laws amendment that is in front of us today, the Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018. An important feature of the life insurance market in this country is that life cover, total and permanent disability cover, income protection, and trauma cover are available not only through individual policies but also through group arrangements. Around 12 million Australians hold insurance for life, total and permanent disability cover, and income protection through their superannuation, with about 80 per cent of these policies provided automatically, currently requiring members to opt out or amend cover if it's unsuitable. Premiums vary widely, but in total have increased by 35 per cent over the last three years to $9 billion across this country—that's in the 2016-17 financial year.
The current settings in this industry are more a function of history than of considered policy design. The suitability of the insurance relies on trustees balancing cover for members against the erosion of account balances for retirement. Avoiding unnecessary balance erosion is a formidable task and is certainly something that the royal commission recently focused on. Many members benefit from lower costs and ready access provided by default group insurance arrangements in superannuation. These arrangements also potentially address an underinsurance problem. But as we in here all know, many entrenched problems remain. Interestingly, the Productivity Commission point out on page 11 of their report that nearly one-third of all member complaints against their fund are over their insurance arrangements. I think the critical heart of the problem, and what we are going to be debating tonight, is that these are exacerbated by a lack of awareness. Around a quarter of members don't even realise they have insurance.
Particularly for young workers either with no dependants, in the case of life insurance, or low incomes, in the case of income protection, insurance is poor value and doesn't meet their needs. Balance erosion can be highly, excessively regressive, having a disproportionate impact on members with low income, intermittent labour force attachment and/or multiple accounts with insurance, with is about 17 per cent of members. The reduction in retirement balances for many of these members could reach 14 per cent, according to the Productivity Commission—about $85,000 in current terms. For some disadvantaged members it could be reduced by over a quarter, or $125,000. Trustees, according to the Productivity Commission, should be required to annually determine the balance erosion trade-off for the members and publish it on their website. They also go on to say that some members have policies that are of little or no use to them, including zombie policies that cannot be claimed against income.
What does this bill seek to do, given this basic background? The treasury laws amendment bill before us tonight has three schedules, the purpose of which are to make amendments to the SIS Act. It limits the amount fees that can be charged by a trustee of a superannuation fund for MySuper or choice products to three per cent of the balance of the account if the balance is less than $6,000. In other words, it puts a cap on that value erosion that the Productivity Commission have brought to everyone's attention. It prohibits superannuation funds and approved deposit funds from imposing exit fees when a member disposes of all or part of their interest in a fund. It prevents superannuation funds from providing insurance, such as death cover, total and permanent disability cover, or income protection insurance, on an opt-out basis—which is the way it currently is—if the member is under the age of 25 years and begins to hold a new superannuation account on or after 1 July 2019, if the member's account balance falls below $6,000 or if the member's account has not received a contribution for 13 months and is inactive. We will be talking about that definition of 'inactive' shortly. It also requires savings account providers and superannuation providers to pay the balance of MySuper or choice accounts to the Commissioner of Taxation where the account is inactive and the balance is less than $6,000. And, finally, it requires the commissioner to consolidate any amounts received in a person's superannuation account that will have a balance of $6,000 or more once consolidated. More precisely, schedule 1 caps fees and costs at three per cent, schedule 2 prevents life insurance and super from being opt-out according to those criteria and schedule 3 requires the transfer of all inactive superannuation accounts to the ATO, which should create an incentive to super funds to ensure that people do not have multiple accounts and do not get charged excessive fees as a result.
The Greens believe that schedules 1 and 3 are largely acceptable, with only relatively minor issues of concern that we would like to see amended. We do have a problem with the premise of schedule 2, that people under 25 do not need life cover as they are less likely to have dependants and less likely to become permanently sick or injured. However, those under 25 who would most benefit from life insurance are likely to be the most vulnerable, have kids younger and/or be lower down the socioeconomic spectrum in Australia. Blue collar unions and associated industry super funds strongly support insurance being retained as opt-out for default funds.
My office and I have had consultations over many months with a number of stakeholders. I've met with the Grattan Institute, who have publicly said, through the submission process on this bill, that they support changing opt-out to opt-in. I've listened to their concerns and, of course, I've let them know that I disagree. I've also spoken to a number of other stakeholders across the spectrum, including many unions and industry super funds. All these views have been factored into our decision and our amendment here tonight.
There are also issues with the definition of 'inactivity', which applies to schedules 2 and 3. The main issue is that defining it at 13 months would inadvertently capture parents on parental leave. The other issue is that people might engage with their superannuation fund, for example, by changing their policy settings, yet still be considered inactive. So we'll be moving a number of amendments to deal with those issues tonight, and I plan to go through the detail of those amendments when we go into committee stage. I would like to flag that I will no longer be moving a second reading amendment. That won't be necessary.
It's very important that we understand that the level of financial literacy in Australia is very low. This is certainly something that we've all known in this place, especially those of us who have been involved over the years with the economics committee on numerous inquiries, many of them relating to the scrutiny of financial advice or the provision of financial advice. Even though I have a finance background myself and have worked in the industry, I'm often also very lazy and inattentive to my own details of my own financial circumstances. It's difficult to expect young Australians, particularly young Australians who may not have an education or background in finance and how it works, to be paying full attention to detail. This, of course, has been labelled in many circumstances as asymmetries of information, and it was a critical point that was raised by the royal commission.
The Greens do believe that the key problem with this bill is in schedule 2, in changing insurance from the provision for an opt-out, which means that basically you can choose to opt out. I agree there are many ways we can make it more effective to have policyholders know their information and choose to opt-out or opt-in, but we're going to change that tonight if you support the current bill to a provision of opt-in, which means that you need to actively go after people to make sure that they're aware of their circumstances. I believe that the universal provision of life insurance is a really good asset of the superannuation industry. It is a very important principle, the universal provision of life insurance, and we'd like to see that remain intact. The main effect of our amendments tonight will be to retain group insurance as opt-out for people with default superannuation, and we want to make the best tonight of what we believe is fundamentally philosophy-flawed legislation.
If superannuation has done nothing else, it has provided affordable life insurance to a much greater number of Australians. The original bill sought to pick apart the provision of life insurance through superannuation, without considering how it would impact on vulnerable people. While I certainly have a lot of time for John Daley and others—even the Productivity Commission—who believe that we should be moving to opt in, the decisions are often made on averages, rather than by looking at individual details. It may be that a small number of young people would be affected by this, but there are potential consequences, for example, for someone who is young and in a blue-collar industry and who is more likely to be running a ladder up the side of a house on the weekend. We are not talking about protection in the workplace here; we are talking about life insurance outside the workplace. This cohort of policyholders are at high risk of injury and death, and this at least gives them that cover. I do believe that hasn't been properly considered in this legislation. I think the old adage is also true that no-one needs insurance until they need it. While we have actuaries assessing those risks, we need to consider the potentially catastrophic implications for those who aren't covered through this system.
It is also important to note that this should not be the end point tonight for changes that need to be made to group insurance and super. Once again, Justice Hayne, through the royal commission, has made a number of recommendations, particularly around a review. I would like to note for senators that, for the money that was spent on the royal commission and the recommendations that were made, Justice Hayne didn't support the Productivity Commission's recommendation to change 'opt out' to 'opt in'. That wasn't a recommendation of the royal commission, which is what this legislation is planning to do tonight. Commissioner Hayne also recommended the development of a standard set of conditions for life insurance, and we support this. Of course, there should be a universal provision for life insurance through super. That should be one of those standard conditions.
I don't think it's any secret for me to say here tonight that the Greens believe that the role of government should be further explored, including whether the provision of life insurance should be nationalised and, if not, do the underwriting itself. We have been on record as saying that a number of times. Many successful countries around the world integrate life insurance with social security. More work needs to be done to ensure that life insurance is better provided, including through superannuation. We believe that while schedule 1 and 3 of the bill have some important aspects, if schedule 2 were amended to essentially remain with the status quo of an opt-out system, then we would be getting a better result for Australians, especially working Australians, and the most vulnerable cohort in this country. I will go through our amendments in more detail when we get to the committee stage. But I will say that if the bill here tonight is supported and our amendments are supported and passed, we will be voting for the third reading.
As my colleague Senator Patrick stated previously, Centre Alliance is very happy to support the Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018, but we are disappointed that the government has taken such a very long time to progress it. The 'protecting your superannuation package' bill does what its name says: it essentially protects low-balance super accounts from being eroded by excessive fees and insurance. The main beneficiaries will, of course, be young people, who, due to often having multiple jobs in their early working lives, usually end up with multiple low-balance super accounts. This bill preserves the balance of idle accounts so that they cannot be cannibalised by excessive fees and insurance once the balance falls to $6,000. Fees will be capped at no more than three per cent of the account balance, with is very much a welcome move.
The bill also requires super accounts with low balances to be transferred to the ATO if the account has been inactive for more than 13 months. This is a very important change, because it means that money accumulated in lost super accounts, lining the pockets of no-one except the super fund providers, can be consolidated into a single active member account. I also very much support the measures in this bill which restrict the application of automatic life insurance on inactive accounts, accounts with balances below $6,000, or those of young people under the age of 25, though the government's amendment will make an exception for those in dangerous occupations, and we do support that.
Workers should be empowered to make their own financial decisions, and their employer or super provider should provide them with relevant information so that their decision is the right one and one that lines their pockets not the super fund's. Not only will this bill assist today's workers but it will also assist every young person who enters the workforce in the future. To put things into perspective, the average job tenure for those under 25 is one year and eight months. This means that someone who may have started flipping burgers at McDonald's at age 14 could very well have worked as many as six different jobs before they reach the age of 25.
The beneficiaries of these reforms will be the workers. The losers will be the greedy super funds, particularly smaller funds, which rely on this member rip-off to keep themselves afloat. By levying fees on these lost and forgotten accounts, fund managers are raking in millions. They are earning more than $587 million a year from accounts holding less than $6,000 and a staggering $405 million a year from those with a balance less than a somewhat paltry $1,000. That's around $1 billion all up. The problem is they are not only eroding returns but they are also eating into their members' capital.
The issue of multiple super accounts or zombie accounts was highlighted in the banking royal commission's final report, which included a recommendation that a person should only have one default super account and that machinery should be developed for stapling a person to a single default account. As of June 2016, 40 per cent of members held multiple accounts. That is a staggering number. More than 25 million super accounts are held by only 15 million people and, what's more, more than half were inactive or held less than $6,000. Australia's largest super fund, AustralianSuper has a staggering 470,000 inactive accounts, and recently announced a 50 per cent increase to its administration fees to take effect later this year, which effectively slugs members an extra $39 a year. That will add an easy $55 million to its bottom line—nice money if you can get it, but at the expense of those who deserve better fiduciary care.
We need to stop members' nest eggs from being poached by profiteering. Some funds may fail to survive without the drip feed they get from whittling down hard-earned retirement savings, but I don't think the industry would be any poorer should this happen. Super should help Australians achieve greater financial independence while reducing the burden upon taxpayers to fund the aged pension, not the opposite. This legislation must be passed to ensure we protect hardworking children, men and women with low super balances, as well as future generations, from a higher tax burden.
I do not believe that the Leader of the Government can exercise his right in that way. Senator Urquhart had the call, she was on her feet and she made a contribution. I think it should stand on its merits. It's time for us to move on. We've got enough chaos and dysfunction going on here without this sort of debate distracting from the mess they've already created.
There was nobody else on the speakers' list. I was quite entitled to rise, and as the Leader of the Government in the Senate I am asserting my privilege to use the chamber to get the call.
Thank you very much, Madam Deputy President. Firstly, I would like to thank those senators who've contributed to this debate. The government is committed to putting members first and protecting their hard-earned retirement savings from erosion through excessive fees and the inefficiencies that result from holding multiple superannuation accounts. The government will support the Greens' amendments to facilitate passage of this bill to ensure key measures are able to commence from 1 July 2019. These measures include preventing trustees of superannuation funds from charging administration investment fees exceeding three per cent per annum of the balance of accounts below $6,000. It also prevents trustees from charging exit fees, regardless of account balance.
This legislation, whose passage through this chamber today we are facilitating, will abolish exit fees on all superannuation accounts, which is of course a great advance and to the great benefit of Australians saving for their retirement, who should be able to keep more of their own hard-earned money, rather than losing it in fees. Under this bill, all inactive accounts with a balance below $6,000 and no insurance cover will be transferred to the ATO. The ATO will, for the first time, be empowered to proactively return these amounts, along with existing unclaimed superannuation moneys, to their rightful owner's active accounts. This will result in around $6 billion belonging to three million members being reunited in the first year alone. The ATO will reunify an amount it holds with its rightful owner within 28 days. Importantly, the amendments in this bill will all now apply from 1 July 2019.
The remaining aspects of this bill, including in relation to superannuation, remain government policy, and the government will continue to work in good faith to secure the passage of these further reforms through the parliament. However, as this government has always done in our period in government, when we can secure the passage of substantial reforms, even if we can't get 100 per cent of what we believe should be legislated, we secure the passage of what we can secure when we can secure it. As a result of the passage of this bill, which we hope will occur later tonight, Australians with account balances of less than $6,000 will have their account balances protected, because there will be a cap on their fees. The trustees will be prevented from charging fees exceeding three per cent per annum, and we are abolishing the exit fees, with is a great advance for Australians saving for their retirement.
I should say that the government acknowledges that insurance in superannuation provides benefits to many people. However, there are some cohorts that do not receive value from insurance, and for too long these people have been cross-subsidising other members. The independent Productivity Commission, in its superannuation report, found that while insurance in super provides value for money for many members, it does not for all, particularly for young members or members with low incomes. The Productivity Commission found that insurance in superannuation is poor value and does not meet their needs, meaning that premiums can result in undue erosion of retirement savings. As I have indicated, the government remains committed to this policy. However, in the interests of ensuring all the other protections in this bill and all the other important reforms delivering benefits to Australians saving for their retirement—
Senator O'Neill interjecting—
Senator O'Neill is laughing at the fact that we are protecting retirement savings of Australians saving for their retirement. We are abolishing exit fees, we are capping the amount of fees that can be charged on superannuation accounts with balances below $6,000 and, indeed, we are also facilitating the consolidation of superannuation accounts, which is, of course, also an important benefit.
Senator O'Neill seems to suggest that instead of banking all of these improvements now because there was a consensus in the chamber behind them, we should have allowed Labor to completely dismantle every aspect of this bill and stopped Australians saving for their retirement from having the benefit of the abolition of exit fees, the three per cent cap on fees that trustees can charge on account balances of less than $6,000 and the consolidation of accounts, which are all part of this legislation.
In relation to extending the definition of 'inactivity', let me say that the original period of 13 months was chosen to provide a balance between the amount of time that account balances are subject to erosion through fees and insurance premiums while being held in multiple rather than consolidated accounts. While noting the Productivity Commission's recommendation and industry's voluntary code of practice for insurance and super, both feature 13-month periods of inactivity. The government has heard concerns raised by stakeholders that some members on extended maternity leave or on extended breaks from work may lose their insurance coverage under this bill. We have therefore agreed to support the relevant amendment circulated by Senator Whish-Wilson.
In relation to administrative actions counting as activity, the government is aware that some stakeholders have called for the test to be extended so that activities such as varying the investment option or changing the insurance cover count as being an active account. It is appropriate to link activity to receiving contributions. Any broadening of the definition of 'inactivity' would result in less-targeted policy. Accounts that are not receiving contributions are at particular risk of erosion, so the government agrees to this element of the amendments.
The government has taken action to address superannuation guarantee noncompliance. The government has introduced, for example, a package of targeted reforms to help improve superannuation guarantee integrity which include improved powers for the ATO to recover unpaid superannuation guarantee entitlements, court ordered penalties for employers who repeatedly fail to pay their superannuation liabilities and increased visibility of superannuation guarantee nonpayment to the ATO, including via extending single-touch payroll to all businesses and increasing fund reporting of superannuation contributions to the ATO.
In relation to the requirement for the ATO to consolidate accounts wherever possible within 28 days, the ATO estimates that, once it receives an amount for which its data matching has identified an active account that can receive the amount, it would take less than a month to transfer it to an active account. The government supports the amendment which allows for the consolidation of accounts within 28 days.
The important point here—and I do want to thank Senator Whish-Wilson for having engaged so constructively with me in relation to these matters and also thank his staff for working so constructively with the staff in the Treasurer's office and my office to talk through these issues—is that this is a consensus which will help secure the passage of important reforms for millions of Australians. This is very good news. I confirm again that the government will separately seek to pursue the remaining elements of this reform package and will continue to work in good faith with all parties represented in the parliament to that effect. With those few short words, I commend the bill to the Senate.
Question agreed to.
Bill read a second time.