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Monday, 24 November 1997
Page: 9314


Senator COOK(9.21 p.m.) —I move:

(7)   Schedule 4, page 23 (after line 6), after item 39, insert:

39A Section 43 (at the end of paragraph (a) of the definition of adjusted taxable income )

Add:

      or (iii)   that were retention bonuses and benefits for members of the Australian Defence Force;

This amendment refers to military retention bonuses. This amendment is similar to the amendments that were moved in the Senate when the legislation was first presented to this chamber—the original first tranche of legislation dealing with superannuation contributions and termination payments taxes.

The purpose of this amendment is to exempt from the calculation of income certain payments that are received by members of the Australian Defence Force. These are payments that are received as retention bonuses. Retention bonuses are made available to members of the services for very good reasons of requirement of the government. These are bonuses paid to people in the services to retain the services skills that are in short supply, and individual people who the services have determined are important to be retained. These individuals are being asked to continue their service in the defence of Australia and, in consideration of their willingness to serve future years, are receiving a financial payment.

This government has already determined that retention bonus payments are to be included as income for surcharge tax purposes, which will place virtually all of the recipients over the threshold above which the additional superannuation tax will by incurred—that is, unless this amendment is supported. In our submission there is no justification for, on the one hand, asking service personnel to give extra years service and, on the other, hitting them about the head with an extra superannuation tax. In the case of, say, pilots in the RAAF and in the army and air traffic controllers, where there has been an acute shortage for some years, the government has actually gone out of its way to entice those people to stay on by offering them a special superannuation bonus. Having offered them a special bonus, it intends to slug their superannuation when they finally get it.

What is particularly galling about this measure is that no advice is being given to people in the services about the effects on their superannuation of accepting the bonus. It is bad enough that the government is actually doing this, but what is absolutely underhand is that the government is not even advising the service personnel that, if they do what the government asks them to do and stay on in the service of the defence forces, they are going to get hit with extra tax on their superannuation benefit, which for many people in the services is a fundamentally important condition of service.

They are not even being given the advice that their superannuation is going to be reduced if they agree to stay on. You have to ask yourself how honest that is. You have to ask yourself what would happen if the government actually came clean with those pilots, air traffic controllers and people in other key positions and told them, `You do what we ask you to do. Stay on and fly a Hercules aircraft or an FA18 for us instead of going off to Qantas or Cathay and earning big buckets of money, because we want your special skills.' But the government keeps tight lipped about what it is going to do with their superannuation.

It is important to understand that these payments that the government is going to include—which will take people over the income threshold for superannuation tax purposes, which will reduce their superannuation payment because the government is going to grab extra tax from them—do not actually contribute to their superannuation benefit. Yes, they get a cash payment. They get a bonus on their income. But that bonus is not actually included to improve their superannuation benefit at all. So it is not as though it goes into their income calculation to boost their superannuation benefit—and then you take a slice of that. They do not get any superannuation increase out of this money. What they get is extra tax imposed on them by virtue of this legislation, which will strip away some of their superannuation benefits.

If the government is not willing to support these amendments, it should at least be honest and open with the defence personnel of Australia. When it says to them, `We want you to stay on and we will offer you a bonus,' it should at least be honest and open and say about it, `And if you accept it you will go over the threshold and incur an additional tax on your superannuation benefit.'

The retention benefit is available also to those service personnel who are in the MSBS, which was introduced by the former Labor government in 1991. The scheme provides that people with 15 years service who undertake a further five years service also get a retention payment. That bonus is not given to them just for length of service. It is given to people selectively on the basis that they have skills to contribute that we want to retain. The simple fact of life is that the government of the day and the chiefs of the Defence Force identify individuals whom they want to retain. In just about every one of the cases, those people are individuals who have some very marketable skills. The reason the government offers them a retention bonus to stay on is precisely that they have marketable skills that see them highly sought after by the private sector. There has been a drain of those key persons and key positions within the defence forces.

The fact then remains that the government provides a significant financial incentive to keep those people, because they have very marketable skills that the private sector head hunts. If they agree to stay on in the service, they will have an additional 15 per cent tax on their superannuation imposed on them. Many of those people do not currently go over the $70,000 threshold; their wages are not that high. Some will, but many will not. It is precisely those people whom you are going to slug with one hand as you try to entice them with the other.

People in the defence forces, particularly the ones we are talking about, are not stupid. They may not be aware of the pea and thimble trick you are playing on them in this legislation when they sign on. But one thing is certain: as they draw closer to their retirement from the services, they will become aware of it. They will think back on the deception that you have perpetrated and will be very disgruntled long-term service personnel. There are enough problems with morale in the defence forces at the moment because of decisions that this government has taken and the ineptitude in the whole range of areas in terms of policy development and structural reform. That ineptitude is causing its own set of problems.

I seek from the government, if it is not willing to support this amendment, a clear statement about its intentions as to the advice it will provide defence personnel, those who have already accepted a retention bonus and those who will be offered the retention bonus in the future. I seek from the government a clear commitment that it will provide full details to each of those individuals who is offered a retention bonus of the impact the acceptance of that retention bonus will have on their superannuation and, in particular, the impact this 15 per cent superannuation tax will have on them. In the course of the debate, I would appreciate a clear statement from the government on that important point of principle. I urge the Senate to support this amendment.