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Wednesday, 18 March 2009
Page: 3047


Mr PEARCE (10:52 AM) —I rise in the parliament today to speak to the Tax Laws Amendment (2009 Measures No. 1) Bill 2009. This bill deals with three schedules, all of which represent quite different outcomes. Schedule 1, which is in the area of PAYG relief, will reduce by 20 per cent the PAYG instalment amount for certain entities. This schedule also allows the PAYG instalment amount for quarterly taxpayers to be reduced by regulation rather than legislation. The coalition agrees with this schedule and is pleased that the government now agrees with us that pressure needs to be eased on Australian enterprise to protect and grow jobs.

Schedule 2, which deals with temporary residents super amendments, contains consequential amendments to temporary residents’ unclaimed money regime changes made in 2008. The coalition supported legislation that required superannuation funds to pay unclaimed super of former temporary residents to the ATO. That legislation was intended to reduce the amount of unclaimed super funds belonging to temporary residents who have departed Australia. This schedule provides an appropriate compliance regime, which we support as it provides consistency for the superannuation industry.

Let me now move to schedule 3, which is all about reportable superannuation contributions. I am particularly interested in this area of the bill in my capacity as shadow minister for superannuation. This schedule troubles me as it may result in inequitable outcomes for some employees, and I wonder whether or not this may be an unintended consequence of the bill as it is currently drafted. Part 1 of this schedule deals with the definition of reportable superannuation contributions. This definition includes salary sacrificed amounts under the income test when determining eligibility for government benefits. Part 1 of this schedule creates a new definition for what is called reportable employer superannuation contributions or RESC. When we talk about the RESC this does not include payments made by an employer to meet the compulsory nine per cent superannuation guarantee contribution. It only includes amounts paid by employers in addition to the nine per cent compulsory superannuation contribution. So the new definition of RESC, if this bill passes, would include payments made by the employer to the employee’s super fund where the employee ‘has, or has had, or might reasonably be expected to have or have had, capacity to influence the size of the payment or the way the amount is contributed so that his or her assessable income is reduced.’ Any payments made by an employer to an employee’s fund that the employee did not control would not actually be included as RESC.

Let us have a look at how this would apply in the real world. This definition of RESC means that contributions made by an employer as part of an agreement that has been negotiated by a third party are not included. Just because it has been negotiated by a third party, it is not included. Third party agreements can be negotiated by any number of people and entities. But in many cases they are negotiated by a union representative. What concerns me is whether or not this is an unintended consequence of the bill and if this is, in fact, an attempt by the government to infuse some ideological base into the bill, which I think would be to the detriment of Australians.

I am concerned—and I know the member for Batman would join with me in this concern—that this schedule has the potential to create two classes of employees: one class of employees who choose to negotiate their own employment arrangements and another class of employees who choose to have an arrangement negotiated, for example, by a union representative. They will be treated differently. So my concern is that employees who choose to negotiate their own arrangements will, as a result of this bill, be treated as second-class citizens. Therefore this is not an equity measure, as Australians who choose to salary sacrifice in their super because of an individual decision are going to effectively be punished, and that is where my concern really rests.

On the other hand, contributions made to employee super accounts because of third party agreements—let us say through a union representative agreement—will be afforded an inequitable advantage. Such employees will have their contributions included as RESC whilst those under a union negotiated agreement will not. You have to say to yourself: where is the common sense in that? Is it in the national interest to create these two classes of employees? I know that my colleague the shadow Assistant Treasurer and member for Casey gave an example in his remarks earlier and I want to highlight this example again because I think it demonstrates where the concern rests.

Let us take, for example, somebody working in a business on the left-hand side of a road. They are in a business, working away each and every day. Let us say that directly across the road there is another person working in another business. Let us say that those two people happen to be friends. Let us say that they both earn $50,000 per year and that both of their employers make a 15 per cent contribution to their superannuation funds. Fifteen per cent of $50,000 is $7,500. Let us say that they are both looking at a certain government benefit and that the income test for that government benefit is just a bit above their salary, at about $51,000. Let us say that the person on one side of the road has reached an agreement with his employer to have 15 per cent paid into his superannuation fund and that the person on the other side of the road has employment conditions that have been determined by a union negotiated agreement. So one person, over here, has determined their own arrangements with their employer, but the person on the other side of the road, earning the same amount of money, has had their arrangements negotiated by a union representative. They are both in the same situation: they are both earning $50,000 a year and they have $7,500 contributed to their superannuation fund. The person who has had their arrangements negotiated by the union will be eligible for the government benefit, because the contributions made by his employer above the nine per cent have been determined by the union negotiated agreement. So the person on the right-hand side will be eligible for the government benefit, only because their arrangements have been negotiated by a union representative, but the person across the road, this mate of the other person, will not be eligible for the government benefit because their additional component—that six per cent which is above the nine per cent, making the 15 per cent—has been determined by them; they have negotiated it themselves, and therefore they will not be eligible under the income test.

That is a very practical example, I think, of the concern that the coalition is raising about this bill. Why would you want to create that difference? I know that the Minister for Small Business, Independent Contractors and the Service Economy, who has just joined us in the chamber, would be very concerned about creating differences amongst employees in businesses throughout Australia. Why would you want to do that to two hardworking Australians earning the same amount of money and getting the same contributions to their super? That is a very important thing, because the whole issue of adequacy of superannuation going forward is a critical concern for Australians. This bill will create those two distinct classes of employees, and that really is what is concerning. The opposition is very concerned about any initiative which creates unfair advantages for particular employees over others. If that is the case—if this unintended consequence of this bill does that—I think it is very difficult for any government to argue that this can be an equity or integrity measure, because the result is inequitable. It is a result that, at its best, will create division and inequity in the workplace, and that is a result which I think is unsatisfactory.

The shadow Assistant Treasurer has highlighted this issue. I think it is also very important to make the point that, in the Senate inquiry into this bill, this issue was also highlighted. The senators raised it as an area of concern. So here is an opportunity for the government to clarify this issue. The government has an opportunity to fix this particular issue in this bill, and I would ask the government to seriously look at this issue and clarify it by moving an amendment which puts this issue beyond doubt and assures the parliament that, in that situation that I identified of two hardworking Australians earning the same amount of money and getting the same level of superannuation, one person will not be treated more favourably than the other and that, in fact, both Australians will be supported equally. I think that is an objective that all members of parliament should be pursuing.