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Thursday, 19 June 2003
Page: 16984


Mr ANDREN (9:44 AM) —I rise to make a short contribution on the Superannuation (Surcharge Rate Reduction) Amendment Bill 2003. The aim of this bill, as its title suggests, is to reduce the rate of the high income earners superannuation surcharge from its current 15 per cent to 13.5 per cent, to 12 per cent and then to 10½ per cent by 2004-05. This is the third time the government has attempted to pass this reduction in various bills. On the previous occasions the surcharge reduction has either been removed, to allow other beneficial super measures to pass into law, or debate was adjourned in the Senate not to be resumed. This has allowed the government to reintroduce the surcharge reduction in a bill on its own and similarly to keep its planned super co-contribution for low-income earners in a bill on its own.

The surcharge was the coalition government's response to electoral pressure that high-income earners enjoyed greater benefit from the super arrangements than other workers. On the issue of the super surcharge I must say that I tend to agree with the opposition that these measures are an unnecessary income boost to those who need it the least. I said in the detail stage of debate on last year's Taxation Laws Amendment (Superannuation) Bill 2002, which contained the surcharge reduction, that I supported the removal of the reduction from that bill. Further, I said I supported the use of the forgone revenue on reducing the tax for high-income earners to reduce the tax burden on savings and superannuation for middle- and low-income earners. Accordingly, I support the intent of the ALP second reading amendment. I accept the assessment of the Leader of the Opposition that this proposal benefits the top three per cent of income earners. I would want far more evidence of the small business operators said by the Financial Review today to be seriously harmed by this surcharge.

The top three per cent are indeed the exceptionally well-off in this community—the ones who can take advantage of negative gearing and the overgenerous capitals gains tax regime we have in this country. Here we have a situation where the richest three per cent can make arrangements through trusts, shareholdings, capital gains, property investments and a host of other investments, apart from superannuation, to maximise their income. All employer contributions, certain handshakes and tax-deductible personal contributions made to super funds are subject to a surcharge of up to 15 per cent at the moment.

There has been considerable debate in the media lately about the fact the surcharge is hitting more workers than it was designed to whilst some have secured exemptions, as state judges managed to do via the High Court. I am happy to see the Treasurer is making inroads with his efforts to close off this judicial loophole to bring those judges under this tax umbrella. The judges argue that because their pensions are unfunded—which is superannuation speak for paid by the taxpayer—they will be unfairly hit by the surcharge and that it was unconstitutional for the Commonwealth to collect this tax. This was recognised by the High Court and exemption was granted.

However, the same cannot be said for other taxpayer funded retirees, as is the case for a number of police in my electorate and no doubt in electorates across Australia. They rely on a similar unfunded pension for their retirement, paid for by the taxpayer. Their workers compensation scheme is tied in as well, and with higher numbers of police retiring with injury, the police superannuation fund actuary increased the level of the notional surchargeable contribution. This pushed their income levels over the threshold and they were hit by the surcharge, which is patently absurd. This anomaly should be addressed but it is no argument for a reduction of the surcharge for all over the $90,000 salary range.

In my recent speech on the budget tax cuts I detailed why we need to talk about a fairer—indeed, greater—tax gathering to sustain our Medicare and other services in this country. We have among the lowest, not highest, tax collections in the developed world. The public wants adequate taxing, which we do not have, to sustain Medicare and our health services and our environmental challenges; but the public demands fair taxing along with an adequate taxing regime. The surcharge was introduced as an equity measure because the gap between the haves and have-nots of super was ever widening. For the 2002-03 income year the surcharge is phased in over the income levels of $90,527 to $109,924. I see no reason why that surcharge should not remain. How about using that $800 million to give a tax break to those who really need a kick along with their super?

The Australian reported yesterday that compulsory super started far too late to help those almost three million Australians between the age of 50 and 64. According to AMP, savings and super earnings will generate just $5,200 a year for a 65-year-old today who makes it to his 80th birthday. This is about half the single aged pension before allowances, which means the taxpayer picks up the shortfall—that is what the Australian says. This $5,200 is about half the single aged pension before allowances. Surely, this is the sector where any equity tax cuts should be targeted so we have a real and sustainable fund for those retirees in the low- to middle-income bracket, rather than the huge taxpayer subsidy that we will more and more have to provide as we head to some 24 per cent of people over the age of 60 by 2020.

The government's own Intergenerational Report, presented with last year's budget, said that old age pensions that now account for three per cent of GDP will rise to close to five per cent over the next 40 years. So what is happening? A piddling $1,000 a year co-contribution for lower incomes earners while we reduce the tax for the well-off—the well-off, I should say, will also include qualifying members of parliament right around Australia. As I have pointed out ad nauseam, those MPs who qualify will enjoy an employer—that is, a taxpayer funded—contribution of around 65 per cent from this unfunded scheme.

The Assistant Treasurer is on the record recently saying people should be able to do what they like with their savings. I challenge her to lobby in support of my freedom of choice MPs' super bill when I reintroduce it to this place. Not only should the better off, including retired MPs, continue to contribute to the financial resources of our less well-off retirees through a fairer tax system—and this surcharge is part of that—but we should also have the same super rules apply to us, as MPs, as apply to most other taxpayers and contributors to superannuation—that is, a fully-funded scheme with employer contributions no greater than the amount we legislate for our constituents. That would be an indication this parliament is fair dinkum about superannuation reform. Thank you.