Senator KEMP (Assistant Treasurer) (4:45 PM) —I appreciate the brevity of the last contribution. Senator Sherry raised a couple of issues, some of them in his usual ungracious fashion. I have to make this preliminary comment, even though I am a man who is not usually provoked: for a person who has spent so much time thinking about superannuation, which I encourage—I think you, Mr Acting Deputy President, are an individual who spends a lot of time thinking about super—so little ever emerges from Senator Sherry's area. Senator Sherry has complained and moaned about super for five years, and one would have thought that, as we go to the next election, he would have had a host of ideas about how to improve superannuation.

Senator Sherry —I have.

Senator KEMP —He has a host of ideas but the truth of the matter is this: what is the Labor Party policy on superannuation? Let me just quote the shadow Assistant Treasurer, who said, `We are going to have a review after the election, if the Labor Party happens to win.' After all this long period of thought and debate and concentration, nothing has emerged whatsoever. Senator Sherry is back on the old superannuation surcharge. As Senator Conroy commented once, Senator Sherry spends about 90 per cent of his time thinking about the superannuation surcharge. You would have thought that there would have been some decent proposals coming forward. It is not unreasonable to expect that someone who thinks so hard and so long about this topic could have come up with some proposals. The astonishing thing is that nothing has happened.

Senator Sherry has gone around and consulted with people, and he has got up and made speeches attacking the surcharge—although, just for the record, the Labor Party supports the superannuation surcharge as part of its policy. Senator Sherry goes off on these frolics. He cannot convince the Labor Party, no proposals come forward and the truth of the matter is, as the Treasurer, who has a nice turn of phrase, has said, the ALP stands for the Australian lazy party. I think that is exactly the truth. It is a very sad reflection on this chamber and on Senator Sherry directly. As a person who is a self-proclaimed expert on super, he has produced so little policy over such a long period of time. It is a very ordinary performance.

Let me return to the Superannuation Contributions Taxes and Termination Payments Tax Legislation Amendment Bill 2001. The measures in this bill have been widely welcomed because they will improve the overall equity and operation of the surcharge legislation in relation to employer eligible termination payments such as redundancies. I note that the opposition recognise the benefits provided to terminating employees by the bill and will support it. We welcome that support, Senator Sherry.

The three measures contained in this bill were announced by the government on 22 May 2001 as part of the 2001-02 federal budget. The first measure ensures that only a proportion of a termination payment received that relates to service after 20 August 1996 will be subject to the surcharge. Without this change, transitional provisions covering surcharge on retained termination payments would end on 20 August this year and the full amount of such payment would be subject to the surcharge. When the legislation went through, Senator Sherry, there was significant debate on this particular issue, if I remember rightly.

Senator Sherry —There was. This is where you should be apologising. You got the bill wrong.

Senator KEMP —You have to apologise to your constituency because over five years you have produced nothing. Never has there been so much talk for so little policy, Senator. You are the person who has held himself out as the world's expert in this area.

The ACTING DEPUTY PRESIDENT (Senator Watson)—Through the chair, please.

Senator KEMP —Thank you, Mr Acting Deputy President. It is a very ordinary performance from Senator Sherry. He has lifted the expectations of people with his promises but he has failed to deliver to his own party and failed to convince his own party. And, I might say, he has failed to declare, on numerous occasions, a direct personal interest in all this, to be quite frank.

Senator Sherry —I would not get into that one—we all have an interest.

Senator KEMP —Senator Sherry, I think it is an important issue and, frankly, I will get into it if I am provoked.

Senator Sherry —Just like you have an interest in it, too.

Senator KEMP —But, Senator Sherry, we have proposed a superannuation surcharge—your party has accepted that. You are proposing to remove it.

Senator Sherry —I am not saying that.

Senator KEMP —Oh, you are not saying that! That is an interesting concession from Senator Sherry—that has never before got in the Hansard. The second measure will benefit low to middle income earners who receive modest termination payments. Currently, taxpayers who are not ordinarily subject to the surcharge may become liable in a given year if they receive a redundancy payment. This is because the whole payment is included in the calculation of their adjusted income for surcharge purposes. This measure will ensure that only a proportion of the redundancy payment, based on the employee's length of service with the employer, will be included in the calculation of their adjusted taxable income.

The third measure will ensure that the maximum rate of taxation payable on any part of an eligible termination payment taken as cash is the top marginal rate plus the Medicare levy. The measures in this bill significantly enhance the fairness and operation of the termination payment surcharge and the superannuation contributions surcharge legislation.

Senator Sherry raised a number of issues, to which I now turn—I hope to Senator Sherry's satisfaction. Senator Sherry raised the issue of the application of the superannuation surcharge to the transfer of superannuation benefits from a defined benefits superannuation scheme to an accumulation scheme. Senator Sherry took some time on this.

Senator Sherry —They were Mr Thomson's comments.

Senator KEMP —Do you want me to respond or not?

Senator Sherry —Just making sure you understood.

Senator KEMP —Thank you, Senator Sherry. Every time I get into my `trying to assist Senator Sherry' mood, I get an abusive comment. It never ceases to amaze me. Senator Sherry, you are a singularly ungracious senator.

The issue that was raised is, I understand, in respect of a Brisbane City Council bus driver. The advice that I have received on this matter is that, when benefits are transferred from a defined benefits scheme to an accumulation scheme, the value of the benefit entitlements of the member is determined at that point of time. Where the trustee calculates a member's benefits using a different method from that required for surcharge reporting purposes, any amounts in excess of the previously reported contributions are assessable in the year that they are transferred.

Frequently when a member converts from defined benefits to accumulation benefits—I think this is very important—there will be an offer of an increase in the member's entitlements to be transferred to the accumulation membership as an incentive to accept the accumulation benefit. In other words, I am putting before the Senate that in this case there is an incentive, an increased benefit, over and above the benefit that would have been offered in the defined benefits scheme as an incentive when you move to an accumulation scheme, and any increased benefits represent contributions in the year that they are received. That may not have been clear in Mr Thomson's comments. I do not know if Senator Sherry has any other information in relation to Mr Thomson that he would like to present to me, but my understanding is that the new schemes, the accumulation schemes, offer increased benefits. This causes the result in Mr Thomson's case that Senator Sherry cited in the debate.

Senator Sherry raised an issue on behalf of shiftworkers at the Eraring power station relating to the superannuation guarantee earnings phase and the surcharge, and I have some information to lay before the Senate. As is well known, the SG legislation requires employers to make compulsory contributions to a superannuation fund for their eligible employees at a certain level based on the employee's earnings base. In the case of award employees, the contributions are generally determined by reference to the award earnings base; that is, the ordinary time earnings. The earnings base for employees not covered under award arrangements would be the SG default earnings base. My advice is that in most cases this is simply the employee's salary or wages, excluding overtime. The surcharge applies if a person's adjustable taxable income exceeds $85,242 in the current financial year. Employees whose adjusted taxable income exceeds $85,242—that is, they are regarded in this legislation as higher income earners—because of a variety of allowances may be subject to the superannuation surcharge even though the earnings base on which their compulsory superannuation contributions is determined is relatively low.

I do not know whether Senator Sherry can shed any light on the Labor Party position. There will always be an argument as to the level at which the superannuation surcharge cuts in. The level that the government has determined is reflected in this year's figure of $85,242 as the level which is marked out for higher income earners. We are saying that in calculating this income there may be a variety of allowances that may be subject to superannuation surcharge even though the earnings base on which the compulsory contributions are determined is relatively low.

I commend this bill to the Senate. The bill reflects a very important aspect of this government: this is a consultative government, a government which goes around listening to people. Some issues were raised with this government; as a result, some changes were made in the legislation. I think this reflects the fact that this bill has—as I understand it—the support of all members in the chamber, which I welcome. I urge a speedy passage of the bill so that the wider public can have greater certainty in this matter.

Question resolved in the affirmative.

Bill read a second time, and passed through its remaining stages without amendment or debate.