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Monday, 11 February 2013
Page: 665


Mr VAN MANEN (Forde) (16:20): It is always wonderful to hear the contribution from the member for Throsby but, as is usual for this government, there was nothing new or constructive to add to the debate.

I rise to speak today on the Income Tax Rates Amendment (Unlawful Payments from Regulated Superannuation Funds) Bill 2012 and the Superannuation Legislation Amendment (Reducing Illegal Early Release and Other Measures) Bill 2012. From my experience in the financial planning and superannuation industry before entering this place, these bills are based on the sound recommendations that have come out of the Cooper review. Although that review was brought down some 2½ years ago, it is heartening to see that some steps continue to be made to introduce some of those recommendations that have been very rightly made to preserve and enhance the integrity of our superannuation system.

The bills in essence are designed to reduce the incidence of illegal early withdrawals from superannuation and to impose some realistic penalties on those people who seek to illegally withdraw funds early. It is also worthwhile to note that there are some provisions within the legislation for the early release of super, but it is strictly controlled and under limited circumstances, such as severe financial hardship, total and permanent disablement, temporary incapacity, terminal illness or permanent departure from Australia. These rules have been made deliberately strict because there is an agreement inherent in the structure of superannuation that it is there for the long term for people's retirement, and the consequence is that you get a concessional tax rate for having your money not available until you retire at age 55, 60 or 65.

The Income Tax Rates Amendment (Unlawful Payments from Regulated Superannuation Funds) Bill imposes a penalty tax rate of 45 per cent for money unlawfully released early from a superannuation fund. Forty-five per cent is the current superannuation non-complying tax rate, so it fits in with current regulatory structures. This was recommended by the Cooper review for simplicity and to reflect the top marginal tax rate.

The Superannuation Legislation Amendment (Reducing Illegal Early Release and Other Measures) Bill introduces civil and criminal penalties for promoters of schemes that result in or encourage illegal release of superannuation. It also makes superannuation rollovers into self-managed funds subject to the Anti-Money Laundering and Counter-Terrorism Financing Act.

This range of measures was again recommended in the Cooper review. The anti-money laundering act also applies to APRA-regulated funds and this extends the application to funds being rolled over from an APRA fund to a self-managed super fund. It requires the people involved to be identified to ensure or lower the risk of money laundering and terrorism financing. This ability to use the safe harbour procedures will mean that transferring funds will not have to collect and verify the full range of customer information.

Superannuation is taxed at a preferential rate to encourage people to save for their retirement. This goal is undermined if people illegally access superannuation savings early, and it is also undermined if money released illegally goes in whole or in part as fees to promoters of these illegal schemes, or is channelled into other illegal activities. The measures contained in these bills are broadly supported across the superannuation industry and would not be opposed by the coalition.

There are other issues that also need addressing within the superannuation environment. A large and increasing number of Australians are confronted with excessive and disproportionate tax penalties as a result of genuinely inadvertent errors leading to voluntary superannuation contributions in excess of either their concessional or non-concessional contribution caps. Some Australians have, in effect, been forced to pay an effective tax rate of up to 93 per cent at times, and these actions have been taken completely out of their control by others. This is why we on the coalition side seek to introduce an amendment to give the tax office some discretion to allow those penalties not to be enforced in the event of an inadvertent breach of the regulations. It can be as simple as a contribution being paid at or near the end of June being processed by the superannuation fund early in the new financial year, when it related to that previous financial year. In the following financial year they make their $25,000 contribution, but because the carryover of the previous contribution—or because it was processed in the new financial year—those two amounts are added together and consequently, inadvertently, those people have breached those contributions caps. The coalition proposes to move an amendment to give the ATO discretion to allow taxpayers to correct those inadvertent errors. As the member for Bradfield rightly pointed out, there are some 66,000 Australians who have been caught in that position over the past financial year and they have paid some $174 million in excess super contributions tax, none of which goes to assisting them in accumulating superannuation benefits for their retirement.

The reason for putting this amendment in is that the ATO argues that they do not currently have this discretion, and these inadvertent errors, for example, can occur where an individual has multiple employers and the cap is breached without any possibility of rectification. An employer contribution may be paid a few days earlier or later than expected, and unexpected bonus payments or redundancy payments can also impact on the contributions. Where salary sacrifice arrangements are in place they similarly can have an impact if caps are altered and not changed in time. Before my time in this place I saw that occur firsthand on a number of occasions. We had to quickly review and ensure that clients who were on salary sacrifice arrangements made those adjustments to the salary sacrifice arrangements to avoid getting caught with changes to these contribution limits. The tax penalties involved are clearly excessive, delivering a tax rate of up to 93 per cent.

This measure should have no impact on the budget as the government should not have been planning its budget revenue estimates based on the assumption that people saving to achieve a self-funded retirement will make inadvertent errors and be taxed at up to 93 per cent on their retirement savings. Taxpayers in this situation who are doing the right thing by saving more voluntarily to achieve a self-funded retirement and take the pressure off the public purse, as a result are currently being unfairly and disproportionately penalised.

In the coalition amendments, guidance is given to the commissioner about the circumstances in which the discretion should be exercised. This is a discretion that should be exercised when the excess contributions are the result of inadvertent errors. Can this government stand up and state in good conscience that their forward estimates are based on the assumption that they will take money from people who have made inadvertent mistakes? Given that the government speakers on these bills have been loudly proclaiming the superannuation framework, the fact that they were responsible for introducing superannuation and the fact that they want people to accumulate funds for retirement—a notion that we on this side absolutely support—it is perfectly reasonable for us to ask the government to give the ATO this discretion.

We know that the government needs all the tax revenue that it can get its hands on. That is not because the people of Australia have done the wrong thing over the past five years; it is because we have a government whose profligate spending has created a situation in which it needs to find money in every single nook, cranny and crevice that it can.

When we take a longer term view and consider that we have an ageing population and an ever-increasing call on government resources in a wide variety of areas, and are faced with a government whose only inclination is to continue to tax the very people with the capacity to provide wholly or at least significantly for themselves, the cruel irony is that the very people we should assist and provide a hand up to lose out. This is because we have a government that creates hurdles and disincentives to saving via super for those who want to plan for a self-sufficient retirement. The government applies ridiculously low concessional limits to superannuation while at the same time increases taxes on those who have already done the right thing by seeking to become self-funded in their retirement.

Self-funded retirement is the ideal outcome for any retirement income strategy. The more people who are either fully or partially self-funded, the more funds that are available to assist those who do not have the capacity to fund their own retirement. That is the risk with the short-term nature of some of the decisions made by this government to prop up its budget revenue because of its profligate spending. It appears that this government simply does not understand this. Over the past five years, some $8 billion has been withdrawn from the superannuation system through higher taxes under this government.

I genuinely hope that we are able to see a superannuation system that maintains its integrity and strength for the long term and that the government is not seeking to profiteer further from future self-funded retirees through the proposals set out in these bills that apply to people who inadvertently exceed their contribution limits and finish up potentially paying up to 93 per cent in taxes.