Thursday, 13 February 2020
Treasury Laws Amendment (Recovering Unpaid Superannuation) Bill 2019; Second Reading
( I'm very pleased today to speak in support of yet another piece of legislation, the Treasury Laws Amendment (Recovering Unpaid Superannuation) Bill 2019, that the Morrison government has brought forward to ensure that the superannuation contributions that Australian workers earn are working in their interests and growing their retirement incomes. Over the past year, the Morrison coalition government has taken strong action to protect Australians' compulsory superannuation and ensure they're paid the superannuation they're due. We know that putting a portion of your income from your pay packet away every fortnight is an important sacrifice, and we have a duty to ensure that when we're locking away a portion of people's income as we are that that superannuation is well looked after by funds. Indeed, late last year the parliament passed the Treasury Laws Amendment (Putting Members' Interests First) Bill, an important piece of reform which prevents young superannuation scheme members and those with low balances from having those balances eroded by fees for insurance products that they may not necessarily require.
As a younger person myself, I have relatively recent experience of setting up superannuation accounts and trying to keep track of where my super is, of having a number of different accounts with different funds, of having fees taken out at a rapid pace each year and of finding myself with not much in those multiple superannuation accounts at the end of the day. It can be confusing and time consuming to understand what is happening with superannuation balances that younger people such as myself may have from various casual or part-time jobs they might have had while studying or starting out in the workforce for the first time. So I think it is really important that we as a government are taking action on things like this, to ensure that superannuation is a transparent investment, that it is an accountable investment and that the hard-earned wages of workers are well looked after by funds. The putting the interests of members first bill I referred to earlier was, I think, aptly named, because we really are putting the interests of superannuation fund members—workers—first. I will get to that a little later, reflecting on some of Labor's contributions to the debate on this bill.
With over 15.6 million Australians with a superannuation account and around $2.9 trillion worth of superannuation savings, making our superannuation system work for members is part of the government's plan for a stronger economy and, quite frankly, is just a good idea. So I'm very pleased legislation that passed the parliament last year will prevent younger people, in particular, from being taken for a ride by super funds locking them into insurance products that they don't need. And further to that, the last parliament passed a package of government legislation to ensure employers can no longer hide from their obligations to pay employees their full superannuation entitlements, which brings us to the bill that is in front of us today.
The ATO has previously found that around five per cent of compulsory superannuation obligations go unpaid. In financial year 2015-16 that amounted to around $2.8 billion of workers' money which should have been paid into their superannuation accounts and, hopefully, grow over time but didn't. The laws that passed the parliament early last year gave the ATO the tools it needs to detect future noncompliance and punish employers appropriately, including, where necessary, criminal sanctions for the worst cases of offending in this area.
On some occasions, superannuation guarantee underpayment is deliberate. That's why the government have taken strong action, not only to detect this occurring but to put in place very serious sanctions for employers engaging in that behaviour. That is why it is quite disappointing to hear from the Labor Party that they don't think we are necessarily being as tough as we could be in this arena. On the contrary, the legislation that we have put in place will ensure that Australian workers are paid their correct dues in superannuation.
But we also recognise that there may also be inadvertent mistakes made when paying superannuation as the result of, say, poor payment systems or in a stressed business situation. There are some instances where underpayment is accidental. Regardless of the motivation, in all cases it's the employees who will miss out if their employer hasn't been paying all of their super. Because of the recent actions taken by the government, new visibility into payment of superannuation guarantees, combined with serious financial and legal consequences for noncompliance, will all but eliminate future nonpayment, and this is a fantastic thing for Australians.
The bill that we're debating today will provide a pathway to recover previous nonpayment and incentivise employers who have underpaid in the past to come forward and make good what they owe to their employees. It's not about giving anyone a free pass; what this bill will do is ensure that employees who might have been underpaid in terms of superannuation by their employers in the past can be reunited with their superannuation guarantee.
There have been some, quite frankly, puzzling contributions from Labor on this bill—the party previously known as the party of workers. I'd just like to reflect on some of the things that they've said this week: 'Safe and secure superannuation is important to the wellbeing of all Australians,' one senator contributed. Well, if this is the case, then why don't Labor support the thousands and thousands of workers not getting paid the super they are owed? Why don't they support the measures that we are discussing here today which will ensure that these workers are reunited with their superannuation? More importantly, why is the party that purports to be the party of the worker attempting to obstruct workers from just getting what they're owed? Why doesn't the opposition want the $2.8 billion that the ATO has estimated was denied to Australian workers in just one financial year to be reunited with them?
I don't want to get too off topic here, but there was another contribution that I heard late on Tuesday afternoon from a senator who said: 'This government needs to be the tough cop on the beat with regard to this legislation.' The opposition senator thought that, in providing this amnesty—the amnesty that is the subject of the legislation that we're debating here today—we're being soft. I find it intriguing that the opposition want us to be tough when it comes to this legislation—their own definition of tough albeit. They want us to be the tough cop on the beat when it comes to superannuation, but have a completely different opinion when it comes to ensuring the integrity of unions: indeed, the opposition voted against legislation to ensure that registered organisations merely obey the law. So, there's an interesting hypocrisy there.
Labor have made reference to circulating an amendment to this legislation and, regarding that amendment, I will just point out: this legislation's already gone through two committees, neither of which recommended this amendment. It's had ample time to be dissected and analysed and, as a relatively new senator to this place, I can't help but reflect that this chamber is meant to be a chamber of scrutiny. That's what the Senate, as the state's house, was designed to do. But, having a bill that has gone through the committee process and not had amendments suggested, and for us to then show up here to debate this legislation this week and have this amendment on our desks, quite frankly, is not really consistent with my definition of scrutiny.
The amnesty legislation that we are discussing here today is designed to encourage employers who were not compliant in the past to come forward to ensure employees receive the superannuation they're entitled to. I reference the developments that have been made in this area to ensure that employees are appropriately paid their superannuation—technology has come a long way in this regard and it is quite exciting. With the advent of Single Touch Payroll and real-time reporting to the ATO by super funds, unscrupulous or sloppy employers will be caught. As I said, that is great for detecting underpayment in the future, but these measures are forward-looking; they don't address historical underpayment.
Reuniting as many workers as possible with the superannuation that is rightly theirs is the priority, so this amnesty is a once-off opportunity for businesses to come forward, do the right thing and wipe the slate clean. To be clear: the amnesty only provides a one-off waiver of charges which would otherwise be paid. It does not reduce employees' entitlements by a single cent; everything that an employer owes an employee must be paid. Don't listen to what those on the other side will tell you. What we don't want is for employees who have been underpaid in the past to miss out on what they're owed just because their employer is taking their chances on getting away with historical underpayment. As I have said, we want to reunite people with the money they are owed as soon as possible.
Legislation to implement the amnesty when it was first announced lapsed in the previous parliament. From 24 May 2018 to six months after this bill receives royal assent employers are able to come forward, disclose nonpayment or underpayment of the superannuation guarantee, pay their workers what they are owed—with significant interest—and avoid the usual penalties and fees that would apply. They are also entitled to claim a tax deduction for the amounts they pay during the amnesty period. Importantly, employers will not be able to use the amnesty if they come forward only after the ATO begins investigating them—they're not getting away with it. This bill ensures those employers who came forward in good faith when the amnesty was first announced are covered by the amnesty. So it really must be legislated as a matter of urgency. Since the introduction of the amnesty over 7,000 employers have come forward. These employers cannot receive the full concessional treatment under the amnesty until it's legislated, and the payments of previous superannuation guarantee shortfall are not tax deductible until legislation—the legislation in front of us today—passes. That's why it is, quite frankly, urgent legislation that this chamber should be addressing.
Treasury estimates that a further 7,000 employers will come forward once the tax deductibility of the amnesty is legislated. It doesn't let employers off the hook and it doesn't leave employees worse off. The amnesty is exclusively designed to benefit employees. Anyone on the other side who tells you otherwise is, quite frankly, fooling themselves. Employers will get the benefit of the amnesty only if they pay their employees' superannuation guarantee entitlements in full. It simply provides an opportunity for employers to review their compliance history, come forward in good faith and pay anything they owe before the ATO begins using its new enforcement tools. Employers with historical superannuation guarantee underpayments who fail to voluntarily disclose the underpayments during the amnesty period and are subsequently found to be noncompliant by the ATO after the amnesty period will be subject to a minimum penalty equal to 100 per cent of the superannuation guarantee charge. This penalty and the underpayments are not tax deductible.
Of course, nobody wants to be in a situation where an amnesty is required to get people to follow the law. But this is a strategy which is used successfully on occasion by various regulators and authorities—even police forces, when we look at amnesties for illegal firearms, whereby dangerous weapons can be taken out of the community, rather than having people hide them around the house or in the back of the shed. The important thing with this amnesty is that we've already legislated and put into place new measures which will prevent future noncompliance. It's not an opportunity for rogue employers just to avoid a penalty and then continue their previous malpractice. If they do, they will get caught.
The government's action to crack down on superannuation guarantee noncompliance complements reforms to protect inactive low-balance superannuation accounts from undue erosion and to put members' interests first, as I said in my opening remarks. As a result of these actions, the superannuation of Australians is better protected from excessive fees, unnecessary insurance premiums and inefficiencies from multiple accounts. And, for the first time, the ATO now has the ability to proactively reunite Australians with their inactive low-balance accounts. I congratulate Senator Hume and Minister Sukkar for the important work that they are doing in this area to ensure that superannuation as a concept is a good value-for-money proposition to the Australian people. I commend this bill to the Senate.
( I rise to speak on the Treasury Laws Amendment (Recovering Unpaid Superannuation) Bill 2019. The coalition government have a strong record on supporting the small businesses that employ Australians. It is in our blood. As you may recall from my maiden speech, I ran my own small business firm for 15 years prior to coming to this place. I understand the challenges that small businesses face and I've always worked hard to give them a fairer go.
Small businesses are prevalent in all sectors of the economy and in all of Australia's regions. Small businesses comprise nine out of 10 Australian businesses. A healthy small business sector is a prerequisite for a growing economy with high employment opportunities. In fact small and medium businesses are a major employer in the construction industry, agricultural sector, rental, hiring, real estate services, the retail industry, accommodation, hospitality and food services. From the local cafe down the road from my home through to the pharmacy owned by the husband and wife team, there is no doubt that small businesses are the backbone of our country.
An honourable senator interjecting—
I'll ignore the interjections from my friend on the right. In a very real sense, small business counts. The coalition government are backing small businesses to help them get ahead and create jobs. There are fundamentally two ways the coalition government support small business—firstly, indirectly, by creating a business framework or environment they can work and thrive in by having policy settings that reduce red tape and lower taxes, and workplace laws and supports for fairer competition; and, secondly, directly through government grants for start-up businesses and export grants, just to name two. The legislation before us today fits this by providing small business employers the opportunity to make good on their obligations to their employees, without beating them over the head with a stick and surrounding them in bureaucratic paperwork.
The Treasury Laws Amendment (Recovering Unpaid Superannuation) Bill 2019 is a superannuation guarantee amnesty which was first announced by the government in May 2018. The amnesty is designed to encourage employers who were not compliant in the past to come forward to ensure employees receive the superannuation they are entitled to. The reality is we rely on businesses to report their earnings, payroll and superannuation liabilities. With the introduction of Single Touch Payroll and real-time reporting, businesses now have more accurate information. Long gone are the days of abacuses and manual ledgers. This policy is forward-looking. We understand that this new system does not address historical underpayment of super. Reuniting as many workers as possible with that superannuation that is rightly theirs is therefore our priority. This is a once-off opportunity for businesses to come forward, do the right thing and wipe the slate clean.
This amnesty must be legislated as a matter of urgency. Since the introduction of the amnesty, over 7,000 employers have come forward. This means that the employees of these 7,000 employers will now receive what is rightfully theirs. Treasury estimates that a further 7,000 employers will come forward once the amnesty is legislated.
As those opposite might have you believe, this amnesty does not let employers off the hook and does not leave employees worse off. The amnesty is designed exclusively to benefit employees, a fact that I do not understand why those opposite will not accept. I repeat: the amnesty is exclusively designed to benefit employees. Employers will only get the benefit of the amnesty if they pay their employees superannuation entitlements in full with significant interest. This simply provides an opportunity for employers to review their compliance history, to come forward in good faith and to pay anything that is owed before the ATO begins using its new enforcement tools. Employers with historical superannuation underpayments who fail to voluntarily disclose those underpayments during the amnesty period and are found to be non-compliant by the ATO will be subjected to a minimum penalty equal to 100 per cent of the superannuation guarantee charge. This penalty and the underpayments are not tax deductible. Therefore, they are not getting away with anything. Furthermore, the ATO's cracking down harder on the underpayment of super. It has updated its practice guidance in relation to the remission of the additional super guarantee charge imposed under part 7 of the Superannuation Guarantee (Administration) Act 1992. Previously, the ATO chose a remission level at intervals that are much lower than the maximum penalty.
When the bill was first introduced, it was the community who called for a bigger stick for employers who did the wrong thing. This iteration of the amnesty achieves the correct balance of carrot and stick, the carrot being the amnesty and the stick being the higher minimum penalty and the higher default penalty. This bill complements the Superannuation Guarantee Integrity Package legislated last year. It provides employers with a chance to come clean and to pay their historical superannuation debts before new enforcement arrangements come into effect. Our reforms also improve the integrity of the superannuation guarantee system. We can now better detect and deter noncompliance by employers. This was the right thing to do.
This included the expansion of the Single Touch Payroll regime to all employers from July 2019, bringing payroll reporting into the 21st century. It has made it easier for employers to align payroll with their regular reporting of tax and super obligations and to minimise honest mistakes made by business owners. Single Touch Payroll works by sending tax and super information from the payroll or accounting software to the ATO as the payroll is run. It has streamlined the way we pay employees and also ensures that, when salary bands increase due to Fair Work Commission decisions, it is automatically reflected. If anyone has ever used an online payment system like Xero or MYOB, they will know how easy it is to click a button to generate the BAS. It is a game changer for small businesses.
The Morrison government has also taken strong action to protect Australians' compulsory superannuation, to ensure they are paid the superannuation they are due. These reforms not only benefit employers but, importantly, benefit and protect employees and, of course, their superannuation entitlements. More frequent reporting of employer superannuation guarantee obligations is being complemented by near-real-time reporting from superannuation funds on the contributions they actually receive. This enables the ATO to identify mistakes or noncompliance early and to take action to help small business rectify the situation as quickly as possible.
Unfortunately, there is no doubt that there can be those employers who seek to take shortcuts or short-change their staff. Therefore, the government has also introduced serious consequences for employers who do short-change their employees, by strengthening the ATO's collection and enforcement capabilities. The ATO has new enforcement and collection powers, including strengthened arrangements for director penalty notices and security deposits for superannuation and other tax related liabilities. In cases where employers defy a direction to pay their superannuation liabilities, the ATO can now apply for court ordered penalties, including up to 12 months imprisonment. The ATO also has the power now to require employers to undertake training on their obligations.
Recognising that at times employees are unaware that they have not been paid super, the ATO can now inform all potentially affected employees of any ongoing investigation into their employers' superannuation compliance. This will ensure employees remain updated as the investigation progresses. Previously, the ATO could only communicate with employees who had made a complaint to the ATO regarding their unpaid superannuation, leaving affected employees in the dark.
To ensure the ATO has the resources it needs to make sure employers are paying their fair share of tax and superannuation, the government provided the ATO with an additional $133.7 million in the 2018-19 budget. In financial year 2018-19, the ATO contacted more than 22,000 employers as a result of reviews or audits and recovered over $805 million in unpaid superannuation for employees.
The government's action to crack down on superannuation noncompliance complements reforms to protect low-balance and inactive superannuation accounts from undue erosion and puts members' interests first. The Protecting Your Superannuation legislation commenced on 1 July 2019. It protects the hard-earned superannuation savings of Australians from excessive fees, unnecessary insurance premiums and inefficiencies from holding multiple accounts. The reforms also, for the first time, provide the ATO with the ability to proactively reunite Australians with their low-balance and inactive accounts. Under the reforms, trustees are required to provide insurance only on an opt-in basis to members with inactive accounts unless the member has directed otherwise. This prevents the inappropriate erosion of retirement savings for cover that members do not know they have and which goes beyond what they need or which they cannot claim on.
The government has also introduced the Putting Members' Interests First bill, which is currently before the parliament. This legislation amends the Superannuation Industry (Supervision) Act 1993 as well as the Superannuation (Unclaimed Money and Lost Members) Act 1999. It ensures that members who are under 25 or who have balances under $6,000 are asked whether they wish to have insurance before premiums are automatically deducted from their accounts. As my colleague Senator the Honourable Jane Hume has said, if you are selling insurance that people don't need, don't want or don't understand, we will investigate; and, if we find evidence, we are likely to bring proceedings against you. And, as my colleague the Honourable Michael Sukkar MP said in the other place, given the significance of superannuation to Australians' retirement, government wants to ensure that people's hard-earned savings are not necessarily eroded by inappropriate insurance arrangements.
Superannuation is now the second-largest savings vehicle for Australian households and it accounts for 17 per cent of household assets. This particular reform will result in millions of Australians saving billions of dollars in fees and charges and insurance payments, and will reduce unnecessary duplicate accounts. Importantly, members will still be able to obtain or maintain insurance cover within their superannuation if they choose to do so. When the tax office data showed that 96 per cent of young people under 25 don't have dependents, it did make us wonder why they are automatically billed for death and disability insurance when they are signed up to super. Secondly, it seemed odd that, when a young worker joins their employer's super fund, they are likely to be automatically enrolled for insurance for death and disability, and possibly also income protection, without being asking for their permission. Thirdly, one in four people simply did not know that they were even covered in the first place. The fine print on insurance arrangements are complex.
We are serious about backing small business but not at the expense of everyday Australians' retirement savings. This bill provides the opportunity for small business to rectify honest mistakes and poor compliance for the benefit of their employees. As they are the employers of many everyday Australians, by supporting small business we are supporting workers. I commend the bill to the Senate.
Compulsory superannuation is an essential pillar of Australia's retirement income system. This was highlighted very, very succinctly by the then Treasurer Dawkins, a Labor Treasurer, when he said superannuation was 'an important mechanism for increasing national savings and improving the flexibility of future government budgets in the face of an ageing population'. He made that comment to demonstrate how important it was for Australia to think carefully about the construction and maintenance of its compulsory superannuation arrangements. The 2015 intergenerational report clearly demonstrates that Australians are living longer. In 1974-75, the number of Australians over 85 was around 80,000 people, or less than one per cent of the population. By 2054-55, it is projected that this will grow to around 4. 9 per cent of the population, which will equate to nearly two million Australians aged 85 and over. In this context, the Intergenerational report stated:
An ageing population also underlines the importance of considering the overall adequacy of our retirement incomes system — which combines compulsory and voluntary superannuation, and the Age Pension as a safety net.
Indeed, the Intergenerational report found:
In 2013-14, about 70 per cent of people of Age Pension age were receiving the Age Pension. Of these pension recipients, around 60 per cent receive a full rate pension.
Should this proportion continue, it will place on the Australian Commonwealth budget a very substantial burden for future governments to manage, which is why there is strong and important bipartisan support for increasing the retirement savings of Australians through our compulsory superannuation system. I'd suggest that where the government and the opposition vary on this issue is that the coalition government recognise the importance of boosting retirement savings within the context of the current economic environment. There's no point boosting savings for those in a job if it means that significantly fewer people are in work and therefore they do not have the opportunity to save for retirement.
The Morrison government has already taken strong action to protect Australians' compulsory superannuation and to crack down on late payments. In March last year, the coalition government legislated a suite of reforms to improve the compulsory superannuation system to improve detection and increase deterrence of the underpayment or failure to pay compulsory superannuation. This includes the expansion of Single Touch Payroll to all employers from July 2019. Single Touch Payroll revolutionises the ATO's ability to track underpayment of superannuation as well as PAYG liabilities in real time. This is a game changer and aims to reduce regulatory burden by an efficient, technology based solution while simultaneously increasing compliance. I acknowledge, like others do, that the implementation of Single Touch Payroll has been burdensome for a number of businesses. However, I am confident that, over time, business will see the benefits of this system.
As well as tackling the issue of on-time payment, last year the parliament passed the Treasury Laws Amendment (Putting Members' Interests First) Bill 2019, which tackled default insurance undermining the super balance of young Australians and those with balances under $6,000. I also add that I note that the merit of this is still contested in some parts of the community and it is a matter I will pay or continue to pay very close attention to. Nonetheless, these are two significant measures to boost the savings of Australians.
The bill we are discussing today seeks to legislate the government's announcement of 24 May 2018 to provide an amnesty to businesses who self-report errors in historical superannuation payments. So you might ask why this amnesty is important. From my perspective, there are two issues worthy of note. The first is that the ATO does not have the resources to audit every business's superannuation contributions. Just as the ATO does not have the resources to audit every individual taxpayer every year, it is unrealistic and would be incredibly inefficient if superannuation liabilities were checked by the ATO each and every year.
I note, of course, that, going forward, Single Touch Payroll does mean that the ATO will have significantly more real-time data to identify and address superannuation guarantee anomalies. It makes sense to provide an incentive for individual businesses to self-audit and fix issues before they face the significant penalties that now apply for failure to pay the superannuation guarantee. Since the introduction of the amnesty, 7,000 businesses have already come forward, and the Australian Taxation Office expects an additional 7,000 businesses to do so following the passage of this legislation. That's 14,000 Australian businesses admitting liability without a resource-intensive audit by the Australian tax office, and 14,000 businesses coming forward means there will be thousands and thousands more that have undertaken a self-audit without finding previous errors in payments.
The second issue which is fundamental to the operation of this government is that this is an important measure to enable small, medium and family businesses, in particular, to address genuine issues of the past without potentially business-destroying penalties. The chief executive of—