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Monday, 29 October 2012
Page: 12197

Ms ROWLAND (Greenway) (12:15): I am very pleased to support the Superannuation Laws Amendment (Capital Gains Tax Relief and Other Efficiency Measures) Bill 2012 and the Superannuation Auditor Registration Imposition Bill 2012. These bills demonstrate the commitment of the government to increase the efficiency and effectiveness of the Australian superannuation system. The measures in these bills further the efforts of the government in its Stronger Super reform activities, about which I will say more in a moment. Australians can be confident that this Gillard Labor government is acting decisively in the present to ensure that every Australian can retire with dignity in the future.

I note the argument of the previous speaker, the member for Dunkley, that there was no evidence for the need to include provisions requiring further audit regulation. I suggest he take a look at the detailed findings of the Cooper Review into the Governance, Efficiency, Structure and Operation of Australia's Superannuation System and its specific consideration of these provisions. At page 16 of the Self-managed Super Solutions report, dated 29 April 2010, the Cooper review stated:

Submissions consistently supported the view that it was not the level of trustee knowledge, or compliance activity that needed to be increased; rather it was the qualifications, competency and professional standards of SMSF service providers. The theme of raising standards reverberated across all stakeholders groups (members, auditors, accountants, administrators and industry associations).

The Panel believes that the SMSF sector should be serviced by providers who are required to attain and maintain a minimum level of SMSF competency. Minimum standards would be aimed at greater consistency among service providers. More importantly, it would provide members with greater protection and reduce the risk of inappropriate advice.

So it is far from being something that was not carefully considered and based on evidence. Maybe in his own time the shadow minister can pick up and read the rest of the Cooper review. The provisions that the member specifically attacked are about increasing the integrity and probity of the explosion in the growth of SMSFs. By definition, self-managed super funds are those with four or less members. In Australia, there is over $400 billion in assets under self-management, which is about a third of total superannuation assets. SMSFs are promoted by entities such as accountants and financial planners, and in some cases the SMSF option may be ill-suited to a person or to a person's specific situation.

Given the exponential growth of SMSFs—which are regulated by the ATO and not APRA—it is important to have confidence in the audit process. I think it would be a good thing under the proposed reforms that a trustee must have an audit by an approved SMSF auditor. By any objective measure, it is better than having an accountant doing the books who is also signing off on the audit side. The clear intention arising from the recommendations in the Cooper review is to improve the integrity and probity of the process, enabling funds to do best what they are designed to do, which is to generate retirement savings and not lead to circumstances such as those experienced by victims of the Trio or Storm incidents.

I know from discussions with the sector that cases abound, for example in agribusiness schemes being promoted to SMSFs, where funds are ill-suited to the risks involved, and beneficiaries then wonder why they lose money. The predictable arguments of overregulation are not based in fact, are not based on inquiry, and in fact have no relevance to what we are discussing here today. Unfortunately that is not anything new—and I refer to some recent commentary on superannuation issues. Following the government's Mid-Year Economic and Fiscal Outlook, announced last week, the member for North Sydney made a number of outrageous statements suggesting that Australians with superannuation accounts that were dormant for 12 months would have their superannuation transferred to the ATO as lost accounts. He told Alan Jones on 2GB:

If your kids go overseas for 12 months or you're unemployed for 12 months and you don't access your superannuation account, then it's going to the tax office.

These statements are a total misrepresentation of the government's MYEFO measure in this area. Whether it is the result of intent or ignorance I do not know. Both the minister's press release and the MYEFO document make it perfectly clear that it is only the accounts of unidentifiable members that will be transferred to the ATO after 12 months of inactivity. If your contact details are known to the super fund, this measure has no impact on you whatsoever.

It is absurd for the shadow Treasurer to repeatedly misrepresent the truth of this very important government measure. Of course, the member for North Sydney forgets that lost superannuation accounts can be claimed at any time through the ATO's SuperSeeker website. Furthermore, the relatively small number of Australians who will be impacted by this change will be better off in many instances. That is because they will not have their retirement savings chewed away by fees and costs charged by superannuation funds.

If the member for North Sydney were so concerned about the entitlements of Australians, what prompted him in April this year to tell the Institute of Economic Affairs in London that the entitlement mentality was over and that bestowing entitlements on people placed future economic stability at risk? The hypocrisy of the member for North Sydney is staggering for those of us on this side of the House. His contribution to the debate in this area has been typical of the misinformed and false commentary that they have given on this government's important superannuation reform agenda.

As I mentioned earlier, the government is proud of its commitment to improving the Australian superannuation system and responding to industry needs. It is no secret that the rationale for reinstating the taxation relief foreshadowed in the Superannuation Laws Amendment (Capital Gains Tax Relief and Other Efficiency Measures) Bill 2012, which I will refer to as the super CGT bill, is connected to the government's Stronger Super reform agenda. That agenda encourages increased size and scale of superannuation funds to provide a range of benefits to members, including enhanced product features, lower fees and greater potential for better investment returns from a larger pool of assets.

I have been fortunate to have had many discussions with members of the superannuation industry on this issue. A recurring theme with industry leaders is that tax considerations rank high for trustees of superannuation funds who are considering a merger. The value of a member's superannuation interest may include the tax benefit of unrealised net capital losses or revenue losses. In the absence of the optional loss relief and asset rollover contained in the super CGT bill, a merger may lead to a reduction in the value of the member's superannuation interest. In turn this can often act as a severe shackle on trustees of superannuation funds who are considering the merits of merging with one another. In fact, the trustees may decide to reject a merger proposal where there is a significant negative impact on member accounts.

The relief provided in the super CGT bill removes the obstacle to eligible funds merging that would otherwise exist because of the extinguishment of the tax losses. I note that the measures are designed to operate in respect of mergers that occur on or after 1 October 2011 and before 2 July 2017. These measures have been welcomed by the superannuation industry and there are some very recent examples of the benefits they will bring to the industry. Only last week two well-known industry funds—Asset Super and CareSuper—merged to create a fund with more than $6.5 billion under management and almost 270,000 members. In a press release dated 12 October 2012 from leading national law firm Corrs Chambers Westgarth, the legal counsel for Asset Super noted:

There is a great deal of merger activity in the superannuation industry at the moment and this is another example of the trend towards industry consolidation.

A key factor in the transaction was the availability of CGT relief for super fund mergers. The Government’s proposal to extend the availability of the CGT relief was critical in terms of enabling the merger to proceed.

In a joint release, dated 31 August 2012, from Asset Super and CareSuper regarding the merger, Julie Lander, CEO of CareSuper, commented:

… the estimated cost savings from merging are more than 15% per year just on business as usual activities. Looking ahead, further savings will be achieved with only one fund, rather than two, undertaking the significant amount of work needed to meet the new Stronger Super requirements.

The super CGT bill demonstrates this government's commitment to greater efficiency in the superannuation industry by providing for a reinstatement of the tax relief that the industry has been calling for. I am delighted to be part of a government that delivers such meaningful legislative responses to industry need.

I would now like to make some brief comments in relation to schedule 2 of the CGT bill and the Superannuation Auditor Registration Imposition Bill 2012. They contain initiatives which are largely designed to introduce a new registration regime for auditors of SMSFs, or self-managed superannuation funds. APRA's latest quarterly superannuation performance statistics noted that at 30 June 2012 there were 478,263 SMSFs in Australia, compared to 442,987 as at 30 June 2011. The APRA statistics also revealed that these SMSFs have a total of $439 billion in assets under management, accounting for 31.3 per cent of all superannuation assets in Australia. So there are clearly a huge number of SMSFs in Australia, and their numbers are growing at an exponential rate. Ensuring their compliance with superannuation and tax laws and the accuracy of their financial statements is vitally important to the industry and this government.

As I mentioned earlier, the Cooper review identified a number of issues in the existing SMSF scheme for auditors. These issues include the lack of SMSF auditor independence, with a number of approved auditors also acting as the SMSFs' accountants, as I mentioned earlier; differences in minimum competency standards for approved auditors; and differences in the enforcement actions applicable to approved auditors. Consequently, the Cooper review made a number of recommendations to address these issues, including that ASIC be appointed the registration body for SMSF approved auditors, be responsible for determining eligibility requirements and setting competency standards, and determine and take appropriate enforcement action with the assistance of the ATO.

Schedule 2 of the CGT bill and the Superannuation Auditor Registration Imposition Bill 2012 implement the government's response to those precise recommendations of the Cooper review in relation to auditor registration and independence. In essence, we have embraced the recommendations of the Cooper review in respect of SMSF auditor registration and independence. The government's objective in doing so is to raise the standard of SMSF audit competency and ensure there is a minimum set of standards that applies equally across the SMSF sector.

Those opposite may argue—as they have, indeed—that these are heavy burdens to place on the SMSF sector. The government flatly rejects such arguments. Given the size of the SMSF sector in the superannuation industry as reflected in the APRA data I referred to, it is critical to ensure that SMSF auditors are preparing high-quality audits and that any rogue elements of the sector are weeded out through appropriate enforcement action. Streamlining and strengthening superannuation are important matters for this government and feature strongly as part of our broader Stronger Super reform agenda.

There are several benefits associated with these bills. In the time available to me, I have sought to highlight some of them. It is evident that many working Australians will receive a tangible benefit from the measures being implemented by the passage of these bills. These actions are also a genuine reminder of the government's continued commitment to policy delivery and achieving its vision for the future of Australia in this regard. These bills are also another strong example of the government listening to the needs of the superannuation industry and responding to important policy issues rather than peddling untruths and seeking to alarm Australians about their superannuation savings, as some of those opposite have become accustomed to.

The superannuation framework under this Labor government has enabled Australia to amass a national savings pool in excess of $1.4 trillion, with estimates that this will grow to over $6 trillion by 2037. At a time when we all understand that we have an ageing population and the need to boost our national savings now, it is imperative for the reforms contained in bills such as these to be implemented in full. I urge all members to support these important reforms.

The DEPUTY SPEAKER ( Ms O'Neill ): Before the debate is resumed on the Superannuation Laws Amendment (Capital Gains Tax Relief and Other Efficiency Measures) Bill 2012, I remind the House that it has been agreed that a general debate be allowed covering this bill and the Superannuation Auditor Registration Imposition Bill 2012.