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Monday, 11 February 2013
Page: 650


Mr BILLSON (Dunkley) (15:17): Thank you, Speaker, and well done on explaining the title of this legislation! It is quite a whopper and I hope those listening will persevere. I rise to speak on the government's Income Tax Rates Amendment (Unlawful Payments from Regulated Superannuation Funds) Bill 2012 and Superannuation Legislation Amendment (Reducing Illegal Early Release and Other Measures) Bill 2012. It just rolls off the tongue, doesn't it! I am sure we could have come up with a catchy acronym there! The bills before the House seek to reduce the incidence of illegal early withdrawal of superannuation.

Before speaking to the bills, I would like to foreshadow to the House that on behalf of the coalition I will be seeking to move an amendment to this bill, which gives the Australian Taxation Office discretion to allow taxpayers to correct inadvertent errors leading to excess superannuation contributions breaching either concessional or non-concessional superannuation contribution caps. This amendment would give the ATO the option to remedy excessive and disproportionate tax penalties where it believed honest mistakes had been made. I will move to circulate this amendment during the consideration in detail stage of this bill.

But first, I will speak about the bills as they are. Both schedules 1 and 2 within the Superannuation Legislation Amendment (Reducing Illegal Early Release and Other Measures) Bill 2012 originated from recommendations of the Cooper review, which was handed down on the 30 June 2010, over 2½ years ago. Schedule 1 of this bill seeks to introduce civil and criminal penalties for promoters of schemes that result in or encourage illegal early release of superannuation.

Schedule 2 of the bill seeks to make superannuation roll-overs into self-managed superannuation funds subject to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006. I note that this act already applies to APRA regulated superannuation funds, and that this is an extension to the self-managed super fund sector. The coalition views both of these initiatives as sensible policy measures. The early release of superannuation is only allowed under strictly limited circumstances. These circumstances include cases of severe financial hardship, total and permanent disability, temporary incapacity, terminal illness or permanent departure from Australia.

Schedule 3 of this bill seeks to amend the Superannuation Industry (Supervision) Act 1993, by introducing a range of administrative consequences for contraventions relating to self-managed superannuation funds. This has come about because there has been a view that the existing penalty regime available to the Commissioner of Taxation is limited in terms of its application to trustees of self-managed super funds. This schedule seeks to give the Commissioner rectification and education directions. The cost to government of providing these directions that are being made available to the Commissioner of Taxation comes in at $17.1 million over 5 years. This will be recouped by the government through increases it has made to the Self-Managed Superannuation Fund Supervisory Levy announced in MYEFO last year. The coalition has been critical of this increase in the levy, which saw it rise from $191 to $259. It will hit 480,000 self-managed superannuation funds, whilst raising $320 million over the forward estimates. The coalition will not oppose the measures contained within this schedule, but we are critical of the hike in the levy through which the Government has chosen to fund these measures.

The second bill, the Income Tax Rates Amendment (Unlawful Payments from Regulated Superannuation Funds) Bill 2012, seeks to impose a penalty rate of tax of 45 per cent for money unlawfully released early from a superannuation fund. This measure is also consistent with recommendations of the Cooper review. Rules in relation to the early access of superannuation are deliberately strict in order to prevent people from accessing retirement savings early.

Superannuation has always been a preferentially taxed savings vehicle in order to encourage Australians to invest in their own future retirement. This in turn relieves the pressure on government to provide for those who do not have the financial means to support themselves in retirement. To preserve this savings vehicle for its intended use, it is reasonable that penalties exist in order to prevent misuse, particularly given the concessional tax status of superannuation. The coalition wants to encourage as many Australians as possible to plan and save for their retirement and to take full advantage of the benefits that the superannuation system offers. This Labor government has not made life easy for many Australians planning their retirement and the spectre of further changes still hangs over their heads. The government's track record on superannuation has been one of taxation and fiddle, causing great uncertainty for those preparing for their retirement or relying heavily on their superannuation system for their income.

Superannuation is becoming increasingly important as part of household wealth. There has now been about $1.5 trillion in superannuation funds under management—that is about the same as Australia's annual gross domestic product. That figure exceeds deposits with financial institutions, which are around $720 billion; it is much larger than direct shareholdings, at around $514 billion; there are also unfunded superannuation entitlements, at $353 billion. So superannuation assets and entitlements totalled $1.8 trillion within total wealth of households and unincorporated enterprises of $7.5 trillion. The superannuation industry, in large part, owes its success to government policy. The industry is boosted by the compulsory nature of superannuation contributions, currently at nine per cent—but legislated to increase to 12 per cent—and by concessional tax treatment afforded to savings in a superannuation fund.

There is only one measure from the MRRT package that a coalition government will keep, despite the enormous shortfall in forecast MRRT revenue, and that is the increase in compulsory superannuation from nine to 12 per cent. It was in this House that I also emphasised that employer funded superannuation contributions are in fact just that—funded by employers—and the government would do well not to overstate and exaggerate the reach of the MRRT measure in relation to the increased contribution rate. The coalition understands the importance of this measure to the Australian workers planning for their retirement and, in light of all the fiddles and changes to the Australian superannuation system over the past few years, we will not add additional confusion to this arising from reversing this particular measure. The coalition government will fund this measure from savings within the budget and not from a tax that hardly raises any revenue.

Superannuation involves a trade-off with the government. Households are induced to lock up their savings until retirement and to forgo consumption today in return for concessional tax treatment. The benefit for the government is the greater financial self-sufficiency of people once they retire and the lower recourse to the government-funded pension system. The legislation before the House is to ensure that this system is upheld by preventing early and unlawful withdrawal of superannuation balances. The coalition supports this legislation before the House and believes that it is in the spirit of the compact between the government and the people. Having said that, I do not want to give the impression that the coalition is supportive of this government's constant fiddling, tinkering and threatening of additional taxation within the superannuation system—particularly of late as the government seems to eye this superannuation nest egg as a way of addressing its enormous budget shortfalls.

Many unexpected changes have been made to Australia's superannuation system by a government driven by the need for revenue to fund wasteful spending. What I find particularly disturbing is that this government seems to have a view that the superannuation industry is a cash cow, ready to be tapped when it sees fit to help fund its out-of-control budget and unrestrained expenditure. There has been a large reduction in the concessional superannuation caps, from $50,000 and $100,000 down to only $25,000, as well as freezing the relevant indexation on that cap. This is particularly of concern to the small business community and for those who may have a limited working life ahead of them, over which time they need to accumulate a retirement savings nest egg. I am frequently reminded by small business people, still reeling from the Labor government induced 'recession we had to have' in the nineties, that so much of their accumulated wealth—the very nest egg that they sought to rely upon for their retirement—was eroded over that time either by a reduction in the value of their business or by their business being forced to fold. Those people may have a limited window of their working life within which to accumulate a retirement nest egg that they can depend upon for the standard of living they hope to work for—and they feel they have worked for—right throughout their working life. So these reduction caps may, on the surface, seem to have some thought behind them if you look at them through the eyes of regular contributions throughout the adult working life of a superannuation saver, but that is not the journey of many Australian people—and it is particularly not the journey of those courageous men and women of small business, who may take the opportunity from a rare profitable year to provide handsomely for their retirement, in that year where they have that chance, realising that it is but a fraction of the nest egg they will require for a dignified retirement.

There has also been a new supertax imposed on people earning more than $300,000 a year. Again, one needs to look at that over the working life of a person and not at a single snapshot as if that represents their entire working life. The government has only partly addressed the excessive penalties imposed by the ATO when people make inadvertent errors and breach their superannuation contributions cap. I will come back to that issue shortly and speak to some examples that I am very much aware of.

To make matters worse, there are fears that the government will again dip into superannuation in the forthcoming budget to help balance the books. There were rumours circulating widely throughout the media—and, some are suggesting, being planted by representatives of the government—over the past couple of weeks that the government plans to impose tax on the currently tax-free income flows from those aged 60 and above. It was as if they were testing the waters for this further tinkering and tax gouging on superannuation. Articles from the Australian newspaper suggested that these rumours have originated from the minister's own office, despite his repeated denials. After having tested the waters, the government had to rule out this threat given the protest that was building against such moves. Any further fiddling and changes would do nothing to build confidence in the superannuation system. Consumers and the industry need stability in policies and the certainty that the nest egg they are building will be there to fund a comfortable retirement. In recent days, the government has sought to attack the coalition over our intention to rescind another superannuation measure, the low-income superannuation tax offset, funded out of revenue from the MRRT—or should I say the anticipated, but not forthcoming, revenue from the MRRT.

I want to set the record straight on this. The tax offset was announced as part of the government's Minerals Resource Rent Tax package—the MRRT. The coalition has been on the record for a long time with our commitment to scrap the MRRT because it is a bad tax for Australia. Not only has it created sovereign risk implications in terms of our nation's attractiveness to foreign investors, but it is well short of its forecast. On Friday, we learnt that the government had collected $126 million, against a revenue forecast of $2 billion. The government's low-income superannuation tax offset measure, linked to the mining tax, is unfunded expenditure because of the MRRT's incapacity to bring in the revenue that the Treasurer not only forecast, but banked and spent well in advance of it actually materialising.

The coalition have been entirely transparent and upfront about our position on this tax offset. This stands in stark contrast to Labor, who promised there would be no changes to the superannuation arrangements before the 2007 election, and then reduced the government's superannuation co-contributions for low-income earners from $1,500 under the Howard government to just $500. This move stripped $3.3 billion out of low-income earners, a lot of whom would be working women. That is a salient point for this country's Prime Minister, I would have thought. Let us not forget that it is this Labor government that has hit Australians' savings with more than $8 billion in increased taxes on superannuation over the five years since coming to government. That is correct—$8 billion of increased taxes on superannuation imposed by these Labor governments over the five years since the election of Labor. The coalition will not be copping any lectures from Labor about superannuation.

I also waved around in a contribution last week what seemed to be a visual explanation of what 'not one jot, not one tittle' actually means. Those in this House and those listening to this broadcast might remind themselves of that assurance provided by Labor prior to the 2007 election. Kevin Rudd said superannuation would not be changed, 'not by one jot, not by one tiddle'. What we have found is there has been more than 50 substantial policy and legislative changes to superannuation since that assurance. So you can imagine why there is still anxiety in the superannuation sector, including those who are saving within superannuation and those who are dependent on superannuation for their revenue, about this reassurance that the payment out of super funds will not be taxed for people over the age of 60, a proposition that has been floated and then retracted in just the last fortnight.

The coalition will be supporting the measures contained within this bill. The changes are supported by industry and are expected, albeit a little late, following the handing down of the Hooper review over two-and-a-half years ago, but here they are and they will have the coalition's support. But as I stated at the outset, I will be looking to move an amendment. This will give the Australian Taxation Office discretion to allow taxpayers to correct inadvertent errors leading to excessive superannuation contributions breaching either concessional or non-concessional superannuation contribution caps. The reasons for these measures have been brought to my attention quite vividly, and I will outline them generally. The Australian tax office argues that it does not have the discretion to allow taxpayers to correct inadvertent errors that lead to a fine or punishment where there is an inadvertent breach of either the concessional or non-concessional superannuation contribution caps. Breaches of such caps attract extraordinarily large penalties, regardless of the circumstances. It is those circumstances that the coalition wishes to address. Some Australians have been forced to pay an effective tax rate of up to 93 per cent at times because of actions taken by others, completely out of their own control.

Today, the coalition is looking to address this problem. I will be moving amendments that seek to give the Australian tax commissioner discretion in a range of circumstances where individuals have made clearly inadvertent errors. In the consideration in detail stage, I will outline that our amendments seek to provide for that discretion, in cases where an individual has multiple employers and the cap is breached without any possibility of rectification; when the employer contribution is a few days earlier or later than expected; when unexpected bonus payments or redundancy payments impact on contributions; where salary sacrifice arrangements have not had caps altered or changed in time; where a late voluntary contribution is not processed until the following financial year; or where a taxpayer has received incorrect advice from a recognised tax adviser or other professional advisers. That will be the nature of the amendments I will be moving in my name at the detailed stage. I will explain in more detail, but simply with that overview I have provided, I hope that the House gets a sense that there are a number of quite inadvertent and unintentional circumstances which can give rise to an extraordinarily disproportionate fine or penalty as a result of the rigidity of the current law and the lack of discretion for the Australian tax commissioner to take account of the particular circumstances.

In closing, the coalition supports these two bills, but we will be moving an amendment to provide the discretion that the ATO needs to deal with inadvertent breaches.