Senator CONROY(8.32 p.m.) —I begin my contribution tonight by thanking the superannuation committee secretariat for again preparing a report on very short notice and under such difficult circumstances. I also thank those who took the time to make oral and written submissions to the committee hearings. The committee sought at all times to assist the government with its legislative program, but it really put the committee behind the eight ball. It was so rushed that the majority of the presentations, despite their excellent standard, were purely oral. An attempt was made to get the committee to report even before the Hansard was available so that very complex issues could be read for the first time. It is disappointing to see that the government members on the committee decided to simply go along with the process in what really is a fairly ordinary report on their part.

Despite some 14 months having passed since the government announced the surcharge tax measure, here we are again debating another piece of legislation on this shambles of a measure before we are able to have any true understanding of the implications. I describe this measure as a shambles because of the way in which the government has chosen to implement it.

When Labor referred these bills to the superannuation committee for public hearings, we were not sure what type of response we would get. There was a concern that people were so fed up with the measure that they could not be bothered going to the trouble and expense of preparing submissions and showing up for the hearings—particularly when it was clear that the government is not listening to what the industry or anybody else is saying. As Noel Davis, a partner and superannuation lawyer with Clayton Utz, said to the committee:

You, at your end, have not seen this, but the arrogance of the government in its responses or its lack of responses to people who have put a great deal of time and effort into putting forward genuine submissions as to what the problems are, and were, with this act, and the arrogance with which those submissions have been dealt with, had to be seen to be believed.

But, on the contrary, with just two days notice, we had some excellent presentations from industry representatives and individuals who showed that the fire is still in the belly on the super tax measure. The government should be on notice. They are a laughing stock over this issue.

The evidence presented to the committee was highly critical of the surcharge tax collection method chosen by the government. Further evidence from Mr Davis was particularly scathing. Senator Cook has already alluded to it, but it is so scathing that it is worth putting it on the record a second time. Mr Davis said:

In my 20-odd years of practice in this area, this is by far the worst legislation that I have seen . . . It is bad legislation and it was enacted purely out of political expediency.

We all know what the political expediency is that Mr Davis is referring to—a broken election promise by the coalition not to increase any existing taxes or introduce any new taxes. But—and this is why this measure is such a shambles—the government tried to sneak this new tax past the people of Australia by calling it a surcharge and using what must be the most complicated collection method in taxation history.

Senator Heffernan —Rubbish! Rubbish!

Senator CONROY —You go out and talk to anybody involved, Senator Heffernan. You are a laughing stock on this issue.

Senator Heffernan —Not as funny as your bow tie.

Senator CONROY —It is funnier than my bow tie. Perhaps the worst aspect of this government's persistence with the complex collection method it has chosen is that it will unfairly affect low and middle income earners, who will pay for the collection of the surcharge tax in higher administration costs and will pay the surcharge tax itself if they do not provide their tax file numbers to their superannuation funds.

The committee heard evidence from Jacques Martin of the poor success rate that Jacques Martin administered superannuation funds have had in obtaining tax file numbers from members. After some three attempts to collect tax file numbers from fund members, Jacques Martin have had only a 23 per cent success rate. That means that thousands of low and middle income earners will pay this tax measure which is supposed to impact only on high income earners.

With evidence such as this, the Assistant Treasurer (Senator Kemp) might like to rethink his constant reassurance to the Senate that low and middle income earners need not pay the surcharge if they provide their tax file number. Clearly, many people are not providing their tax file numbers and will be subject to the surcharge tax.

The government clearly expressed an urgency in seeing these amendment bills passed by the parliament. To assist the government, Labor agreed to allow these amendment bills to be introduced and debated in one sitting session and also agreed to a very tight time frame for the committee to conduct hearings and report to the Senate. However, Labor believes that the parliament should have a reasonable opportunity to scrutinise the bills and recommend appropriate amendments, if necessary. The government's objection to allow a reasonable time for the Senate Select Committee on Superannuation to examine these complex bills and report to the Senate undermines the role of the parliament.

Other issues which Labor raises in the report—which have got no answers yet from the government—include the following points. First, the application of the surcharge tax to individuals in constitutionally protected schemes rather than superannuation funds undermines the government's argument for using the complex surcharge tax collection method in the first instance. Why then is the government persisting with this complex method when it has undermined its own argument for having it in the first place?

Second, there was a lack of detailed responses to the questions raised by witnesses from government officials who attended the committee hearings. Unfortunately, I had to leave before we got to that section, but I am told it was a debacle. I am told that the government and the officials were not able to answer simple questions. It was a debacle.

Third, there is evidence that, even with these amendments, the surcharge tax will not apply to defined benefit schemes because of an absence of an actuarial standard for calculating notional surcharge contributions. Fourth, there was evidence presented by ASFA that these amendment bills add to the complexity of the surcharge tax measure and will lead to further confusion within the industry and amongst those who pay the surcharge tax. This was supported by evidence from Mr Peter Downes of Jacques Martin, who said:

It is the most complex and inefficient series of legislation that has been introduced into the parliament in my time of examining Commonwealth legislation since 1969.

That is almost back to when I was born.

Senator Hogg —Go on!

Senator CONROY —Really. It is that bad, Senator Hogg.

Fifth, there was concern that many funds will not meet the 15 December deadline for reporting to the tax office because there are not enough actuaries in Australia to deal with the complex calculations needed for notional contribution factors. Sixth, several inconsistencies which exist include the application of, and payment of, the surcharge tax liability. Seventh, there was evidence from Mr Davis which was highly critical of the definition of `allocated surplus amount'. On the complex definition, he stated:

It may as well be written in Russian. It is rubbish!

Eighth, there is concern that it could be a double tax on fund members. Ninth—and this is really pernicious—the inconsistent treatment of golden handshakes for surcharge purposes, depending on whether they are taken as cash or rolled over, is inequitable, has the potential to severely damage the superannuation system and is contrary to the government's retirement incomes policy. And they are not all of the problems associated with these bills.

This is a mess that the government has created for itself. It is up to the government to fix it. We have provided ample opportunity to do this and would welcome a further review of this measure if the government is serious about cleaning this shambles up.

Finally, I would like to return to that question of rollovers. I draw senators' attention to Anne Lampe's article in the Sydney Morning Herald on Wednesday, 12 November. She says:

When the Treasurer announced the surcharge in the August Budget last year, he assured everyone that different treatment would be given to eligible termination payments (ETPs) that resulted from lengthy service. He said a five-year phase-in period would apply and the introduction on these payments would be staggered.

However, when the Contributions Tax Act was introduced last June, this principle was adopted in respect of cashed-in ETPs, but not for payments that were rolled over.

There have been no explanations forthcoming from the Government.

This is contrary to the entire thrust of the superannuation policies being pursued, supposedly, by both the government and us. What we have set out to do is encourage people not to take the lump sums but to, in actual fact, take annuities and rollovers. That is the thrust of what we have been trying to do, yet we have set up a piece of legislation here—against the word of the Treasurer (Mr Costello)—that does the exact opposite, and that has affected many people.

Mr Bruce Harris said before the committee:

Had I cashed this same amount of money in, my tax incidence because of the surcharge would have been almost nothing, because I would have had very little service after 20 August and I happened to have quite a lot of service before then, so the proportion would be very small.

He is now going to be hit because the Treasurer has welshed on his word, his press release. That is why this bill is a disgrace and a shambles. I urge senators to congratulate Senator Heffernan on his bow tie.