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Thursday, 2 April 1998
Page: 2384

Mr ROCHER (1:45 PM) —At the invitation of the honourable member for Wills (Mr Kelvin Thomson) I will make a few remarks on schedule 5, although later I hope to have the opportunity to talk a little bit more about schedules 4, 8 and 9.

At the outset, I want to say about schedule 5 that I support in principle the concept of individuals having greater influence over the manner in which their retirement savings are invested—and that is essentially what the measure is all about. However, I am not convinced that the 1 July 1998 deadline for new employees is the most appropriate, nor do I believe that the government has adequately dealt with the concern that this measure could be challenged on grounds of constitutionality.

If anyone needed convincing that past and current savings incentives have failed to bring about reasonable improvements in household savings, they need go no further than a recently published report by the Melbourne Institute of Applied Economic and Social Research. I was pleased to see the Parliamentary Secretary (Cabinet) to the Prime Minister (Mr Miles) refer to household savings. What he had to say about Australia's performance in domestic savings and private savings under the previous Labor government was essentially correct. Perhaps he also might be interested in what the review to which I refer had to say. That review, released in November of 1997, analysed levels of household debt and showed that the trend towards indebtedness in Australia is consistently increasing and that debtor households are now paying, on average, 22.7 per cent of their income in the form of debt repayments.

As if that trend is not alarming enough in its own right, the report also shows that deposits in banks and other financial institutions have declined as a form of saving since the start of 1997 and that the number of households reporting some form of employer based superannuation has fallen markedly since February 1997. So that is the other side of the coin which the parliamentary secretary flipped in the air. The institute observed that this latter trend, in particular—that is, in relation to employer based superannuation—should be of concern to government policy advisers. And indeed it should.

Despite the fact that there is now a greater awareness than ever before of the benefits of—indeed, the need for—long-term savings, fewer Australians are embracing this behaviour. Neither the introduction of the general savings rebate nor the concept of the retirement savings account by this government has as yet done anything to boost national savings. It might be very early days, and I would acknowledge that.

Perhaps increasing the range of superannuation options available to employees is the answer to this government's prayers. Perhaps not. But one thing is certain: unless the coalition takes heed of industry concerns about the timing and constitutionality of this measure, it will find itself facing a similar public relations disaster to that of the superannuation surcharge.

As Ms Beth Quinlivan, a journalist with the Age, suggested in an article published on 2 March 1998:

People attempting to make long-term plans regarding their super have faced an uphill battle. Just as one new set of rules and regulations was announced, another statement would introduce yet more complex variations.

Ms Quinlivan goes on to write:

Still, even for the change-hardened veterans, the number and scope of the proposed variations in current superannuation legislation . . . are almost eye-watering.

The Jaques Martin superannuation fund choice survey, conducted some five months ago, found that while 74 per cent of employer respondents support the move to give employees a greater choice of fund, `only 16 per cent believe they are sufficiently expert to deal with all the requirements of fund choice'.

In other words, up to 84 per cent of employers will most likely have to seek professional advice on how to best meet their impending obligations under these regulations. (Extension of time granted)

That will represent yet another impost on the business sector. However, it is not the additional cost that is causing angst amongst employers as much as the timing of the introduction of the new arrangements. The coalition has made a number of substantial amendments to the original choice of funds initiative, outlined by the Treasurer (Mr Costello) at the time of the 1997-98 budget. Despite the fact that these amendments were made available to industry only last December and that we are only now beginning to debate the detail of the Taxation Laws Amendment Bill (No. 7) 1997 , the government is resisting all calls for a delay of the 1 July 1998 implementation date for new employees for a further 12 months.

The editorial in the Australian of 28 March 1998 predicted:

The government will do more harm than good if it rushes the introduction of the scheme, because while member choice will deliver enormous power to some four million employees, it is a power that most of them are not yet equipped to exercise.

And with that I agree. The British and American experiences in increasing fund choice demonstrate the disaster that lies in wait if consumers are not provided with sufficient information to judge the relative performance of competing superannuation funds.

As one submission to the Senate Select Committee on Superannuation makes clear, there is a very real threat that section 32V of the legislation—that which removes employer liability to compensate an individual for damage or loss as a result of the former complying with this legislation—could be deemed unconstitutional. Put another way, employers could find themselves the subjects of litigation by their staff if a service provider presents employees with inaccurate information about their fund.

That that law could be interpreted in this way is by no means a certainty. But surely it would be prudent to establish that employers will not be held liable for the information provided to their staff by competing superannuation funds before this legislation is passed in this place, not later or after the government has learned nothing from its diabolical handling of this surcharge legislation. Obviously it has not. Member choice is one thing; informed member choice is quite another.

All the evidence suggests that employers will not have implemented the necessary internal procedures to meet their pending obligations by the 1 July 1998 deadline. A huge amount of confusion remains amongst employer circles as to whether it would be most practical to stick with an existing in-house fund, to utilise a workplace agreement to determine a superannuation fund or to offer employees a minimum of four superannuation funds.

Also, unless the government amends its legislation, employers will be obliged to take out insurance to cover their employees in the event of accident or death during an interim employment changeover period. That is totally unsatisfactory. It is also doubtful that employees will have had the time to digest the information afforded them to be able to judge which fund best suits their needs. If reports are accurate that three in four employees are not even aware of the coming of the choice of funds arrangements, then the superannuation industry has a long way to go in educating the general community, and it is nonsensical to rush this legislation through this place.

Already there are examples of industry experts offering employers advice on ways in which they can defer offering their staff multiple funds until this legislation is well understood. While one can empathise with employers and understand their not wanting to proceed until they have all the facts, surely that potential behaviour totally undermines the purpose of the initiative.

Mr Jock Rankin, Executive Director of the Institute of Actuaries, is quoted as saying, `If choice is not properly exercised, there will be no benefit to individuals and the nation.' (Extension of time granted) If the coalition is as committed to encouraging individuals to take responsibility for their own economic wellbeing in retirement as it says it is, then it will postpone the implementation date of increased fund choice for at least 12 months.

Assuming that the choice of funds initiative is not rushed through this place, there is a very real possibility that the increased competition between funds for employee patronage will see an improvement in the servicing of fund members and the products on offer, as well as more competitive fees.

I now wish to turn briefly to schedule 4. I remind the House that in my contribution to the debate on the Trade Practices Amendment (Fair Trading) Bill 1997 on 2 December 1997, I noted that while there was a very good case for the coalition to proceed with its proposal to protect small business in their dealings with larger corporations, it should not fall into the trap of always painting these larger companies as the guys wearing the black hats. I suggested then that the market is too complex for it to be viewed simply as a case of small business versus big business.

The same is applicable to schedule 4 of this bill where the coalition is seeking to mandate that all PAYE, PPS and RPS taxpayers be required to make payments to the Australian Taxation Office by electronic means. Under this proposal, affected taxpayers will not have the choice to remit by way of cheque or any other commercially accepted method of payment. In ruling out this choice, the government stands to undo an otherwise commendable initiative.

The explanatory memorandum states that the impetus behind this proposal is to provide compliance cost relief for small business. The government rightly notes that the burden of managing multiple taxation regimes is particularly onerous for the small business sector. But it is difficult to understand the logic behind this initiative, which simply shifts that burden from one section of the private sector to another. Had the government elected to give private corporations the option of continuing with their current manner of payment or taking up the new electronic method, I suspect there would have been widespread support for the initiative. Instead it is seeking to enact legislation that will punish remitters because of their size rather than for being late with their payments.

Unamended, this bill will impose a minimum penalty of $500 for every remittance paid by a business by any means other than the one outlined in the bill. Given that 1 July 1998 marks the date of the new fortnightly schedule of payments for large enterprises, these businesses stand to be hit by a minimum penalty of $13,000 per annum if they do not comply with the new electronic method of payment. For those enterprises which remit on a weekly basis, the maximum penalty would double. It is ironic that in another schedule in this bill the coalition is seeking to give individuals greater choice in the way in which their superannuation contributions are invested.

The choice of superannuation funds proposal is underpinned by the belief that better informed consumers will yield greater power in the marketplace and force the superannuation industry to become more competitive. The government appears blind to this dichotomy in policy which encourages improved market efficiency by way of increased consumer choice on the one hand but which prevents businesses from remitting by the most efficient method possible for that business.

It has been suggested to me that the Australian Taxation Office must not be able to dictate how business should be run, and that is a sentiment with which I am fully in accord. If the bureaucracy is concerned about some businesses forwarding their cheques later than the due for payment as a means of delaying their payment, then there is a simple solution. It needs only to have the current act amended to reinstate the measure.

Mr SPEAKER —Order! It being 2 p.m., the debate is interrupted in accordance with standing order 101A. The debate may be resumed at a later hour and the member will have leave to continue speaking when the debate is resumed.