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Monday, 25 May 1998
Page: 3018


Senator KEMP (Assistant Treasurer) (8:18 PM) —We are debating Taxation Laws Amendment Bill (No. 3) 1998 , which has a number of important aspects to it. With the rhetoric of Senator Lundy still fresh in my mind, perhaps I could make a few brief comments on Senator Lundy's view of the world. Senator Lundy, what we are offering here is workers' choice. We are giving the workers choice. The second point I make is that your amendment is very similar to option 2 that we put forward. There are a few little extra flourishes but, make no mistake—

Senator Conroy interjecting


Senator KEMP —Madam President, we heard the opposition in silence. I know they are sensitive on this issue. Perhaps they might care to listen. You could not believe, with the rhetorical flourishes in Senator Lundy's speech, that what we were trying to do is to offer workers choice, in other words, give workers a chance to make a choice in relation to their superannuation. Senator Lundy, whatever you say in life as you go through this chamber, small business will never believe that you have their concerns at heart. I have to say that with your track record and particularly that old union of yours, the building union.

As I said, that your amendments are in fact very similar to option 2 that we put forward. I do not know whether you appreciated that, but that happens to be the case. The final point is that, as far as undermining confidence in superannuation is concerned, it has been a great year for super. Super is growing at excellent rates. I do not know how you measure confidence in super. I know how Senator Sherry does but I do not know how you do. The truth of the matter is that, by every measure, there has been very substantial growth in superannuation and people are voting with their dollars to put their money into superannuation. Talk about rhetoric!

This bill implements two government initiatives: choice of superannuation funds and the savings rebate. The savings rebate commences on 1 July 1998. On 13 May 1998 I announced a new start date for the choice of superannuation measure for new employees. That will be on 1 July 1999. Secondly, it builds on the government's program of reducing compliance costs for small businesses by introducing a CGT assets register and changes to the withholding tax arrangements. Thirdly, this bill implements two important 1997 budget announcements which enhance the integrity of the tax system relating to franking credit trading, dividend streaming and private company loans.

The savings rebate will particularly benefit Australian families and older Australians who have saved for their retirement and individuals who have built up their businesses and derive a return. The rebate will apply to undeducted superannuation contributions made by employees and the self-employed and net personal income from savings and investment, including net business income up to an annual cap of some $3,000. In the first year it will apply at a transitional rate of 7.5 per cent and will increase to 15 per cent thereafter. This will deliver a tax saving of up to $450 per year. I know, after many conversations I have had with people around many electorates, that there are many people who, as they should, are welcoming these proposals, which will provide further incentives for people to invest in superannuation.

The rebate, overall, will provide an incentive to save in a way which is fair, allowing individuals to choose the form most suited to their needs and recognising that individuals have to save for life cycle needs as well as for retirement. The bill also implements the government's reforms to choice of fund arrangements. They are designed to give employees greater choice and control over their superannuation savings, which in turn will give them a greater sense of ownership of their savings. The arrangements will increase competition and efficiency in the superannuation industry, leading to improved returns on superannuation savings. I will be moving amendments in the committee stage to amend the start to 1 July 1999.

The bill introduces an asset register for capital gains tax purposes. This will eliminate the need for taxpayers to keep source documents for lengthy periods and will reduce the compliance costs for all taxpayers with capital gains obligations. The new three-tier system for remittance obligations under the report or payment system, pay as you earn and the prescribed payment system will give small remitters the option to remit these payments on a quarterly basis rather than on a monthly basis. This will provide over 300,000 small businesses with the opportunity to defer the remittance of $500 million in withheld amounts in 1998-99. That is certainly a very substantial number of business operators who will benefit from this.

The bill also amends the Income Tax Assessment Act 1936 to ensure that payments and loans made by a private company to a shareholder or to a shareholder's associate are treated as assessable dividends to the extent that they are realised or unrealised profits in the company. I will be moving a very minor technical amendment to this measure in committee. This measure, together with the introduction of a general anti-avoidance rule and antistreaming measures, which formed part of the 1997 budget measures to prevent franking credit trading and dividend stream ing, is designed to protect the integrity of the tax system.

The supplementary explanatory memorandum, which has been circulated, contains further guidance on the intended operation of antistreaming measures and the general anti-avoidance rules targeting franking credit trading transactions. The bill will implement two further budget measures relating to tax deductibility of expenses incurred in contesting election to the Constitutional Convention and donations to the National Nurses Memorial Trust. The Labor Party has made some astonishingly extreme comments, particularly on the savings policy.


Senator Conroy —`Rebates can be milked for more'—it's not my comment.


Senator KEMP —Particularly on the savings policy, but not exclusively, Senator Conroy. Labor's record on national savings is indescribably abysmal.


Senator Conroy —They are pretty impressive.


Senator KEMP —What Labor speakers failed to perhaps make clear to the chamber was, for example, that Labor's national savings rate reached, apart from the world wars and the Great Depression, its lowest level since Federation—since 1901. They did not mention the $10.3 billion budget deficit that they left us when they were thrown out of office. Not surprisingly, it was omitted in their remarks. Not only that, but many of us are aware of the $70 billion deficit that they ran up in their last five years of office. This is a huge amount of money and I am delighted that at least the shadow Treasurer (Mr Gareth Evans) was prepared to concede recently the significant nature of the deficit which he left this government. We commend that uncharacteristically straightforward comment from the shadow Treasurer. We believe the savings rebate is fair.


Senator Conroy —You're a disgrace.


Senator KEMP —Senator Conroy cannot contain himself. Senator Conroy, you are going to have your chance in the committee stage and I hope your behaviour improves when the committee stage is on. If you are showing such high degrees of excitement now, I do not hold out—


Senator Conroy —I can see why you are so nervous about those two other senators from Victoria.


Senator KEMP —Senator Conroy, let us not get into the problems of the Labor Party in relation to branch stacking. I will not be diverted by Senator Conroy. We say that the savings rebate is fair and equitable, unlike Labor's never delivered L-A-W law broken promises and co-contributions. I think that is worth underlining. We believe that it is fair, it is equitable and it will be beneficial to the overall structure of this industry in Australia.

Let me say why we regard the savings rebate as equitable. The opposition spokesmen in this area certainly have no right to talk about equity. They opposed a very significant move by government in recent history to improve the equity of Australia's retirement income system by their opposition to the superannuation surcharge. The surcharge was placed on those people with high income earnings, yet that was opposed by the Labor Party—not actually in the lower house but opposed in the Senate. That has always intrigued us but, in the end, that is the way the Labor Party operates.

The savings rebate will flow to people earning less than $40,000 per annum. Seventy per cent of Australian wage earners earn under $40,000. This is really a benefit flowing to the overwhelming bulk of Australian wage earners. In contrast, not one of these people need pay the superannuation surcharge. The opposition has been, I believe, somewhat misleading in its comments about what the so-called battlers will get from the rebate.

About one-third of wage and salary earners earning less than $40,000 a year made personal super contributions at an average of around $1,300; that is, they already passed the test for getting the rebate. We have given them the opportunity to get an even higher rebate by increasing their contributions. Those who are not making personal super contributions have a big incentive to do so. Each dollar they put in will give them back 15 cents. Not only that, but six million Australians will benefit from this rebate, the vast bulk of whom are lower and middle income earners.

It has been a pity to listen to the debate on choice of funds. Let me make a couple of observations on the remarks which have been made in this debate. I come to this debate having far more confidence than, I believe, members of the opposition do in industry funds.


Senator Conroy —Now don't start on industry funds.


Senator KEMP —Yes, I do have, because what I heard was how well industry funds were doing, and that is true. A lot of industry funds have done well, and the truth of the matter is, in choice of funds, if industry funds are doing as well as everybody said, whom would the worker choose? The fact of the matter is that there will be industry funds which will perform well, and there will be industry funds which will perform less well. If you have not got confidence in industry funds, you certainly lack confidence in workers. If industry funds are doing so well, whom would workers choose, if what you say is correct?

All I can say is that the rhetoric which you have proffered in this debate seems to me to underlie a certain lack of confidence in the substance. As I say, I have more confidence in industry funds than do quite a range of senators on the other side of the chamber.


Senator Conroy —Have you got a list of the ones you like?


Senator KEMP —Senator, can you just wait? You will get your chance. You were heard in comparative silence. We can speed the journey, if you would perhaps keep quiet a little. Choice of funds was a pre-election commitment made by the government in the lead-up to the last election, and the model the government has proposed in order to implement its promise has been the subject of extensive consultation with the superannuation industry, employers and employees. Enhancements to the government's original model outlined in the 1997-98 budget were announced in November 1997, after that consultation.

The first stage of the opposition's choice of fund models involves offering investment choice within superannuation funds. Investment choice in recent years has become a key feature of the Australian superannuation environment. Consequently, many funds do offer investment choice, and it is hard to see how the Labor Party believes that is bringing about any real change in providing employees with greater choice.

The second stage of the opposition's model involves offering what it considers to be `genuine' employee choice. The key features of the opposition's regime of genuine employee choice are in effect quite similar to the employees exercising choice through the informal agreement under the government model.


Senator Conroy —Not a chance.


Senator KEMP —You did not even know that, Senator Conroy. You were given a bit of paper and you did not even know that. However, there is a difference. Under the opposition model, an employee can make no choice—correct me if I am wrong—if the employee is unable to obtain the employer's agreement to the fund they nominate. Correct?


Senator Conroy —You're telling the story; we're just listening.


Senator KEMP —That is exactly correct—unchallenged. So all this talk about the employer having the whip hand, under the model that we have put down—

Senator Conroy interjecting


The ACTING DEPUTY PRESIDENT —Senator Conroy, could you stop interjecting?


Senator KEMP —This is exactly what happens under the Labor model choice. Of course, on the other hand, the government model allows employees to request their employers to make an offer of choice, if they nominate a fund but are unable to obtain the agreement of their employer.

I must say, in relation to the Democrat model, that I notice that one of the superannuation industry groups today suggested that ASFA did not see the Democrats' proposal to restrict choice to two industry funds as being practicable. That was a view that was brought forward from ASFA today. We are clearly going to have a significant debate on this. The government has been open. This has been on the table for at least six months, so the government has been open to discussions. We have made offers to show people the education program that we have put forward.


Senator Conroy —I'm sitting here waiting.


Senator KEMP —You did not accept the offer, Senator. We believe that choice of funds is not only right in a philosophical sense, in order to allow people to have control over their superannuation and to provide a choice for them, but is also the democratic way to go. It is a pity that the Labor Party has become so entrenched in special interest politics that they find it difficult to see that. We will be opposing the Democrat model and the Labor model. As I said, the government has been open to discussion with groups and has sought discussions. I hope that in the course of the debate we can reach a productive outcome.

In conclusion, let me say that the Australian Democrats have recently approached me and sought, in the committee stage, that we debate schedule 5, the choice of fund proposal, later in the running order, so that the amendments that they have can be circulated. The government is happy to accept this suggestion. I understand that, again depending on what the chamber wishes, it might be sensible to begin the committee stage with schedules 9 and 10—private company distributions and the savings rebate, respectively. We are in the hands of the Senate, but that seems to me the sensible way to go.

Question resolved in the affirmative.

Bill read a second time.