Thursday, 30 November 2023
(a) the Senate recognise that the Albanese Government seeks to legislate that the objective of superannuation is to help people retire with dignity, alongside government support, in an equitable and sustainable way;
(b) the Senate expresses that:
(i) foregoing tax receipts to promote superannuation as an estate planning tool is inconsistent with this objective,
(ii) offering generous tax discounts to individuals with high superannuation balances to make additional contributions is inconsistent with this objective, and
(iii) allowing super funds to spend the proceeds of members' money without transparency or accountability to those members is inconsistent with this objective; and
(c) because superannuation's objective is 'to help people retire with dignity...in an equitable and sustainable way', the cohort that Commonwealth superannuation expenditure should target is those who are most at risk of failing to accumulate sufficient savings, to allow them to retire with dignity.
Back in February this year the Prime Minister and the Treasurer held a conference announcing they would change the taxation of high-balance superannuation accounts. They said that Labor was planning to tax the earnings of superannuation accounts with balances above $3 million at 30 per cent instead of 15 per cent. They went to great lengths to say why this was necessary. This is how the Treasurer justified it:' We inherited $1 trillion of debt which was getting more and more expensive to service as interest rates went up. We had persistent and growing spending pressures in health, the NDIS, aged care and, of course, defence.' The Prime Minister said that they would strengthen the system by making it more sustainable. That was an interesting thing to say.
One thing the government and I agree on is that the tax deductions we give people regarding superannuation are expensive. When the bookshop gives an employee a discount of $10 off a $30 book, that discount costs the bookshop money. It's money they would have earned from an ordinary sale but did not. The books will show that they made a sale, but the tills will be short $10. It's as if you charged full price, sold the book and gave the customer a tenner for their troubles. That would show up in exactly the same way when you did your closing sums. Nobody would say that the 10 bucks you handed over was anything other than a cost to the business. Nobody can say the decision not to charge the full rate of tax on super is anything other than a cost to our tax receipts, either. I'm not saying that means these discounts are bad. There's a time and a place for them. Sometimes you want to put in place discounts to get people to do something they wouldn't have done without the discount. Certainly, these discounts are having an effect. People are stashing money into superannuation at a pretty extraordinary rate. In the financial year ending June 2023, Australians stashed away $42.7 billion above and beyond their employer contributions. That's money they put into their super on top of regular payments. That's extra. That's $42.7 billion; Australians paid $30 billion on electricity and gas over the same period. And why wouldn't they? You're allowed to do it. If you have some spare money lying around, you want to invest it. You can invest it in the stock market and pay the same full tax rate, or you can stuff it into super and only pay 15 per cent. Good luck to them. There's nothing wrong with taking advantage of the system as it stands.
I don't blame people who are lucky enough to be in a situation where they've got spare money to stuff into super in a cost-of-living crisis. Contrary to what some in this place might think, not every rich person got that way by doing something wrong. I just think, if you're lucky enough to be in that position, you don't need as much help as people who are doing tough. I don't think that's a controversial thing to say. A person with $1 million in their super account is better off than a person with $100,000. If you only have so much money to use to help people retire with dignity, I'd be thinking that the person who has managed to put together $1 million wouldn't be the person you'd throw most of the money at, yet that is exactly what the system is doing. What I question though is why we're using the tax system to benefit the retirement savings of very wealthy people when there are very poor people who could do with some help and who are going without.
Superannuation tax concessions, the discounts we give people for putting money into super, are estimated by Treasury to cost about $50 billion a year. That is how much our defence budget is. That's the money we could be collecting if we taxed it at the full rate, but we're not. It is the equivalent of our entire national defence budget, and, if we're coping a $50 billion budget hit, it's worth asking where that money is going; who is benefiting from that? According to Treasury's analysis, 40 per cent of the benefit—$20 billion—every year is going to the richest 10 per cent of Australians. The poorest 10 per cent got none of that benefit, not a single lonely dollar.
It's a situation that is getting worse every day, because the richest are the ones with the most money saved in super, and their super is taxed at a lower rate than ordinary income. The ones who make money out of super end up with more money than people who are making money working, after both have paid their tax bill. Your balance grows, and the more it grew in the previous years, the more it grows every year that follows. That's the beauty of compound interest. Money makes money. If you've got it, you'll keep getting it.
But, when the working poor are crying out for help to manage the cost of living, they are told there's no money in the kitty. 'We're skint,' we're told. Superannuation is supposed to be the system that helps people retire without relying on the age pension. It's supposed to help you live out your twilight years on your own terms. But, if you're one of 80,000 Australians with a balance of $2 million in your super, you are going to be fine in retirement. You'll be very comfortable, rest assured.
In fact, if you're a male retiring today with $2 million in your super, you can expect to live off $100,000 a year for the rest of your life tax free. If you live to your life expectancy, you'll still be left with $1.4 million in your super account when you die. If that's you and that's the situation you're in, you should be very pleased with yourself. Well done to you. You've done nothing wrong. You've invested well. You've put money away for a rainy day, and in retirement you receive the dividends for being a good saver.
But I have some bad news for you, and you're not going to like it. The Australian taxpayer subsidising you to live off $100,000 a year for the rest of your life is not a good use of taxpayer money, and I'm sorry to say that. I know it's hard to hear, and I don't say it because you are bad or evil or unworthy. I say it because there are people who aren't as well off as you who need help, and giving them a leg up now can help take pressure off the age pension down the track. A tax break for you will not help us save money down the line. It just fattens up your retirement savings and lets your super fund charge a higher fee. But a tax break for people in their early working life who have a shot at retiring without requiring the age pension saves us money.
The crazy thing is that our system doesn't prioritise these people; it prioritises the richest 10 per cent. In other words, there are two ways your lifestyle is funded in retirement: super and the pension. The more money you have in your super account, the less you are able to get of the pension. Keep in mind that your money grows in super, so the money you put into today is worth more later. Giving you money, or handing back money out of the till, might make sense if the money we give back grows enough to reduce your pension payments later on. Giving $10,000 in tax breaks to super makes sense if it saves you $20,000 in pension payments down the line. Giving $10,000 tax breaks to super payments makes no sense if the person you're giving them to won't ever qualify for the age pension because they have too much money already. If you have $2 million in your superannuation, you will not need the age pension. Spending money on you does not make sense. It might be nice for you to get, but that's not enough of a reason to do it.
The Labor government has made a noose for its own neck by promising to not touch superannuation tax concessions. During the election the Prime Minister said: 'We have no intention of making any super changes. We're making all of our policies clear'. Now he's saying that just because he had no intention then doesn't mean he can't change his mind—and he's right. It doesn't mean he can't change his mind. But why say it? People vote on policies that they think are yours and they expect you to work on them. Then you just change your mind and say your policy is to do the opposite. Do they get to change their vote too? Anyway, that's not the point.
The point is that the government is acting on making the system more equitable and more fair, and I think that is commendable. But they're doing one thing affecting people with more than $3 million in their super not especially clearly and not especially well. In the meantime there is low-hanging fruit that should be grabbed to make the system work for more people. I say that because the prism through which we should look at super taxation isn't 'How good is this for me?' but 'How good is this for the country?' A good, solid, sustainable system is good for the country. An unsustainable system that rewards the people who need it the least is not good for the country. It might be good for those getting the benefits, but that doesn't mean it's good.
One policy that I think makes sense is to pay super on carer's payments. Informal care is massive. About 2.8 million people provide informal care across the country. About 300,000 people receive carer's payments, half of them are over 55 and three-quarters of them are women. For many of them providing care is full-time work. You might find yourself in a situation where you're providing care in the blink of an eye. If your child suddenly requires daily care, you can't work and provide care at the same time. If an elderly parent needs support, you can't help them every day if you're working every day.
People on carer's payments tend to have to take time out of the workforce to provide care. Some will never return to work. Some will go back and when they do their superannuation will have gone backward. They have a one or two-year break in their income, which means they've got one or two years with no contributions from their employers. If they go back to work part-time, the gap will continue to grow. It will never close. Women already retire with less than men. We know that's not fair. These gaps in super are making it worse.
Paying super on carer's payments would be an investment in future pension savings. It's basically the Australian government putting money into superannuation on your behalf. The money you make is money they save when you retire. Giving it to everyone, however nice it would be, does not make the same sense, because about half of the people on carers payments have been on them for more than 10 years. Giving them super payments would not make sense, to be perfectly honest, because while it would be nice to be able to afford to do it, we'd be paying them money to take pressure off the pension—and it will not realistically do that. They will still retire with a full age pension because their balance would not come close. They have been out of the workforce for too long and the gap has grown too big. But if we limited payments to only people under 40 and only for the first two years, that would cost about $60 million per year. Because that $60 million would grow in their super accounts, it would end up saving money. The budget would actually be healthier by making these payments, supporting people to retire in dignity, in a way that is equitable and helping the budget at the same time. You might say, 'That makes sense and it is worth doing but where will that $60 million come from?' I say, 'Where is the $43 billion we are spending on super concessions every year coming from? You tell me.' This is the kind of thing you can afford to do if you are prepared to shave one-tenth of one per cent from the existing superannuation tax concessions, if you take just one per cent of the tax deductions we give to mostly high-income earners and then give 90 per cent of it back to those high-income earners.
Consider the difference you can give to early career carers. You should not retire in poverty just because your mother gets a terminal illness and you need to take leave from work to help look after her. You should not have to choose between dignity in retirement and your parents' dignity in the final months of their lives. This is a way we can make sure that choice does not ever have to be made. Yes, it costs us something and, yes, it must come from somewhere. But superannuation is the sort of thing where these choices are already being made every single day, enough choices to fund a whole nation's defence, so I do not accept that we cannot choose to fund this. I do not accept that we can choose not to do it, because that does not look equitable or sustainable from where I am sitting.
The coalition does not support this motion. Superannuation is Australians' money that they invest over long timelines and they deserve certainty about the policy settings that affect their retirement. The former government delivered major reforms to superannuation that supported better member outcomes, better performance and transparent governance and that were driven by the clear understanding that superannuation is Australians' money.
The Prime Minister and the Treasurer promised no changes to superannuation prior to the election, and the Prime Minister promised no major changes to superannuation in February 2023 but has since broken that promise by introducing a new tax on unrealised capital gains, which is a world-first wealth tax that will hurt farmers and family businesses, and force Australians to pay tax on money they have not earned. The government's failure to index the new superannuation tax means that up to two million young Australians earning average wages today will face a wealth tax according to analysis of the Treasury model published in The Australian newspaper. The government should respect the mandate from the Australian people and abandon its broken promise on taxing superannuation.
Senator Tyrrell, I am pleased that you brought this proposition here. I enjoyed listening to your contribution. It is a very welcome discussion in this chamber about the future of superannuation. It matters for individual workers and their families, it matters for the future of our economic system and it matters for—as you indicated—for fiscal stability and for meeting the government's economic objectives more broadly. So even though there will be disagreement in terms of content of the proposition, it is very welcome to have members of the crossbench contributing to these big economic questions about the future of the superannuation system.
Despite its central role in the retirement income system in Australia, there is no agreed objective of superannuation—legislated or elsewhere—that serves as a guide for policymakers, governments, regulators, the superannuation industry and the wider community and that is something that this government is determined to set about doing. These kinds of discussions occurring here are in a broad way helping inform that discussion.
There are jurisdictions all around the world that look at the Australian superannuation example with admiration and envy. It is seen as a shining lodestar for economic reform around the world. It was reported recently in the United Kingdom, where some workers have access to these kinds of pension fund arrangements and some workers don't. It's really interesting: what does this mean?
In Australia, as somebody who began in the Labor movement in the early 1990s—I am very, very old; I feel very old this week!—at the time when superannuation became a legislated right for all workers, I'm very conscious of the role that the accord process played. The Labor movement and then Labor government; Bob Hawke and Paul Keating; and the ACTU, led by Bill Kelty, Laurie Carmichael and some of these other people changed our economic fabric and made the deep economic reforms that really positioned Australia well for the 21st century. I saw building workers who had access to a growing superannuation account. I saw manufacturing workers and workers in civil construction—not just tradespeople and supervisors but process workers and labourers—who began the process of starting superannuation accounts. And people in the building industry—the building unions and building industry employers—started the old CBUS fund, which is still a very big fund now.
There were workers then, in the 1990s, who could retire with a nest egg that meant they could pay off their homes and set themselves up for their retirement. Some of them were able to self-fund their retirement and some had a mix of entitlements from the pension and their superannuation. They had choices about how they would spend their retirement years. That contrasted with so many other people I knew who didn't have that same dignity and didn't have that same choice. So I'm deeply conscious, not only of the proud tradition that the Labor movement and the Labor Party have in founding and building superannuation in this country but also of our unique responsibility not just to defend that legacy but also to think carefully about the future of the system. We need to consider, as Mr Jones, Mr Chalmers and others in the government are considering, how we refine and develop that legislated purpose. How do we set it out in a way that provides clarity?
It is a unique system. It is, as Senator Smith has said, in many respects, the superannuation account holders' money; it is their entitlement for when they retire. It is also a unique national asset: $3 trillion is in our superannuation system, last time I looked, and $2 trillion of that is in the industry super funds. That money must be protected and defended at all costs to secure a decent retirement for the account holders. But there are unique investment objectives to ensure that there's a rate of return appropriate for ensuring retirement in the long term for individuals. Those investment objectives match some of our potential; we must make sure that where there's an opportunity for superannuation to invest in the infrastructure of the future, in the industrial capability of the future around the country and in the kinds of projects that we need to make Australia the most productive it can be, that the right approach to risk and return is taken in all of those questions.
This is an enormous national asset that our country has and that very few other countries have. It's something that we should defend and protect all costs, and think about in an intelligent way. As I said, this debate is indeed very welcome. I understand that there has been a strain of thinking about this on the other side of politics that is reductive and offended by the very idea of trade unions and industry associations playing a role at an industry level in these questions. I think that misses the point of the system. The hostility to the trade union movement that sits behind a lot of this opposition and positioning around the future of superannuation is ultimately destructive. Ultimately, it undermines democratic institutions and the way that this system needs to be set up. What we want is Australians and Australian institutions working together in a meaningful way to make the kinds of decisions that these funds can make.
When we look at the history and the growth trajectory of what these funds are delivering for Australian workers and their families, there's a lot to be proud of. The size, scope, scale and growth of individual accounts over time are unparalleled. There are a few financial institutions, certainly private financial institutions, that can offer these kinds of benefits, this kind of scale and this kind of management. From where it started, it's building investment capability. Many of the funds would go to the investment experts, the private outfits at the big end of town, but many of these funds have built their own investment capability and they're some of the best people in the world. They're building the capability to make smart investment decisions. They're not flashy, with the greatest respect to the private investment houses—which have a very different culture—but they invest with an ethos to invest workers' money in a really careful way, and in a way that, over time, has delivered enormous benefits.
The government has introduced a bill that would establish the objective of superannuation as being to preserve savings to deliver income for a dignified retirement alongside government support in an equitable and sustainable way. That objective will serve as a reminder that achieving better living standards for Australians in retirement is at the heart of the superannuation system, and future policy changes should be compatible with that legislated objective. In line with that objective, the Assistant Treasurer introduced legislation that would reduce the tax concessions on total superannuation balances exceeding $3 million. I understand that was opposed by the opposition, and I won't argue with them about that today. I understand that they object to that proposition, but I just don't think that many ordinary Australians would object to the idea that tax concessions would not still be available for people who have superannuation accounts with more than $3 million in them, but think that it's a modest and responsible change that better targets tax concessions and doesn't interrupt the stability of the system.
If you're a school cleaner and you have a superannuation account, you wouldn't think it reasonable that the very small number of Australians who can stick $3 million into a superannuation account get an overly generous tax concession arrangement. If you're a welfare recipient in regional Queensland, the future of welfare payments depends on a sound fiscal position, you would not think that superannuation accounts with more than $3 million in them should have an overly generous tax treatment, but they will continue to have some tax concessions. The concessional tax rate applying to future earnings of superannuation balances above $3 million will be a headline rate of 30 per cent. Earnings corresponding to amounts below $3 million will continue to be taxed at 15 per cent. That is an entirely reasonable proposition.
I understand that there is an ambition to go further. I welcome the discussion about all that, but that is the government's position. It is a reform that was opposed by some parts of this parliament. We believe that is a reasonable, effective position. We think there is strong support for it in the community, and it will mean a better targeting of amounts that deliver income for a dignified retirement. Members must also have confidence that every dollar that's spent by their superannuation fund is done so in their best financial interest, so we've strengthened transparency requirements in the superannuation system.
We passed legislation that would align reporting requirements for superannuation funds to be the same as the reporting requirements for public companies. And there is a lot of misinformation that is out there, particularly about the industry super funds and the payments they make. Those enhanced reporting requirements will make it very clear there is very strong governance and there are very strong boards. Some of the most capable people in Australia are serving on those boards. I've been lucky to sit on some of them over the course of my professional life, and I have nothing but admiration for those funds. It doesn't mean, like any corporate board or any board or any governance structure, that mistakes aren't made from time to time. They will be.
We're also going to make sure that payments are made on time, that there is effective compliance out there to make sure that every dollar, particularly for low-income workers, is deposited in their superannuation accounts at the right time.
I have just become conscious that there may be another senator who wants to contribute to this. I realise I've taken all my time and I really regret that I did.
Senator Ayres just belled the cat: he said superannuation was a national asset. It is not a national asset. It belongs to the people. It belongs in their individual bank accounts. This rubbish that it generates a return—people are paying 6½ per cent on their mortgage after tax. There isn't a super fund that is paying 10 per cent pre-tax at all. People are being forced to put money into superannuation when they could be paying down their mortgage at 6½ per cent.
Superannuation is a rip. It costs $50 billion in tax concessions for the mainly upper 25 per cent. It costs another $30 billion a year to run. And what's the average balance? The median balance for men aged 60 to 65 is $211,000. That will not get them off the pension. The median balance for women aged 60 to 64 is $158,000. It isn't going to do a thing to get people off the pension. It is nothing but a junket for rich people, the big end of town, the big corporates and the big unions who are milking hardworking Australians dry. For Senator Ayres to be saying it's a great national asset, nothing could be further from the truth.
Superannuation was set up by Paul Keating, Bill Kelty and Iain Ross. Iain Ross became famous as the president of the Fair Work Commission. They mandated superannuation and they mandated vaccines. And who in these industry funds actually gets to vote for the directors on the board? No-one. Because it is not democratic. It is communism. You have now got $3 trillion in centralised wealth controlled by 17 industry funds who all use the same proxy adviser at these AGMs to control what goes on in the economy. If you control $3 trillion in capital, you control industry and you control the media. It is unmitigated fascism, communism, and Marxism. I seek leave to continue my remarks later.
Leave granted; debate adjourned.