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Monday, 18 June 2012
Page: 6728


Mr FLETCHER (Bradfield) (16:36): It is always a pleasure to follow the member for Fraser, who gave us a discursive exploration of superannuation policy after briefly deigning to come to the specifics of the bill before us. Naturally, I am going to be more limited and—some might say—small minded by concentrating purely on the provisions that are before the House this afternoon.

What I would like to say is that, in the broad, the coalition is supportive of the legislative direction contained in the legislation the House is considering this afternoon. It is an uncontentious proposition that the superannuation sector is dominated by paper based transactions, and that there are real inefficiencies, real deadweight costs and transactions costs. There is clearly capacity to secure efficiencies through the use of information technology standardised formats for the exchange of data and so on.

Coming, as I do, into this place from a background in the telecommunications sector, I became quite surprised as the Parliamentary Joint Committee on Corporations and Financial Services on which I served learnt about the challenges currently facing the superannuation sector and the extent to which information is exchanged in paper based form. By contrast, and as one example of the kinds of efficiencies which can be secured on an industry wide basis through the use of information technology, in the telecommunications sector the mobile number portability standard requires that if a customer wishes to port his or her number from one mobile operator to another, it needs to take effect within the course of one day—and often it takes very much less time than that. Therefore I have in my own experience seen the efficiency benefits which can be delivered when standardised information technology systems are used and data transfer standards are applied to a range of participants in an industry.

Let me readily concede that the superannuation sector challenge is an even more daunting one than the one which applies in the telecommunications sector because of the fact that, in addition to all of the superannuation funds—and there are of course hundreds of them—you also have millions of employers, ranging from the very, very large to the many very small businesses. That does present some specific challenges and it also presents some areas of concern with particular aspects of this bill—areas which I am pleased to say were acknowledged by the committee in its unanimous report.

In the brief time I have to speak about this bill today, I want to make essentially three points. Firstly, I want to say that the provisions underpinning greater efficiency in superannuation contained in this bill and the legislative scheme, in the broad, make sense. Secondly, I want to highlight the fact that there are real reasons for doubt and for questioning why the amount of money which has been sought by the Australian Taxation Office to implement this set of information technology changes, and which is funded ultimately by a levy on the industry, is so high. Where is the justification for the costings? Thirdly, I want to question why it is that the legislation takes a particular approach which in particular bristles with penalties and strict liability provisions.

Let me turn firstly to the broad rationale for this bill—a rationale which, as I have indicated, the coalition supports. As the explanatory memorandum states:

The purpose … is to improve the administration and management of super accounts making the processing of everyday transactions easier, cheaper and faster for members and employers.

I think any Australian who has ever sought to transfer a superannuation balance from one fund to another would very much empathise with the proposition that, as it presently operates, the superannuation sector is grossly inefficient. That acts to the detriment of members of superannuation funds and all stakeholders, because the costs of the inefficient processing are borne across the sector when it comes to matters such as error, rework, misdirected or lost transactions—all of these things cause cost, inconvenience and inefficiency.

Accordingly, the coalition strongly supports as a principle measures to improve the efficiency, transparency and competitiveness of the administration of superannuation system. We want to see a superannuation system which is easier to use for employers; which ensures fewer lost accounts; which provides a more timely flow of money to the member accounts of superannuation fund members; and which delivers efficiencies and cost savings to employers, to funds and, ultimately therefore, to members.

The scheme of this legislation is to provide for the implementation of data and payment regulations and standards to allow participants in the superannuation system to communicate by using standardised business turns in a consistent and reliable format. The government estimates that the SuperStream measures will save $1 billion a year in processing costs. The Financial Services Council estimates that the reforms are likely to deliver savings of up to $20 billion in aggregate by 2020 based on the current rate of growth of the asset base in the superannuation system.

Anybody who has had any experience with large information technology systems and businesses involving the processing of hundreds of millions or even more transactions would know that very small cost savings per transaction can readily add up to a very large amount of money saved in aggregate across the system. I think that is what we can expect this set of changes to achieve if the scheme has the desired effect.

Stakeholders in the sector are certainly supportive of the objectives. The Association of Superannuation Funds of Australia commented that it:

… considers the SuperStream measures to be the key component of the Government’s Stronger Super reforms as they have the greatest potential to improve members’ retirement outcomes through the creation of a more efficient superannuation system.

The Financial Services Council in its submission to the committee noted that there has been for a long time agreement in principle across the industry of the desirability of establishing superannuation data standards; however, it has not proven possible, to date, in a cooperative fashion to establish those standards and have all the stakeholders sign up to them. Accordingly, there is broad acceptance of the need for legislative action.

That brings me to the second point I want to make which is that, although there is broad acceptance of the need for legislative action, there are eyebrows raised across the superannuation sector as to the surprisingly large amount of money which the Australian Taxation Office has identified it needs to implement these new arrangements. Under this bill a levy is to be imposed on the superannuation sector which amounts to $467 million. That is a very large sum of money by any standard yet at the same time the degree of transparency and justification that has been provided for this very large sum is disappointing. It is a notorious truth that information technology systems development can be an extraordinary black hole. It is very tempting for those involved in the process to inflate their costs and identify a whole range of requirements which add to the total cost of the exercise. It is often difficult for those receiving the bill to assess the validity of the amounts that are claimed but, as a very first step, you need to be provided with details, specifics and justifications for the amount of money proposed to be spent on the new information technology system changes. That is a principle which is true in the private sector and it is equally true in this particular context which is essentially a hybrid of private and public sector activity.

It is not surprising that one of the strong themes which emerged from the committee's inquiry into this legislation is that there has been an inadequate level of justification by the Australian Taxation Office and the government for the amount of money stated to be required, which is to be extracted from the industry by means of a levy to fund these changes. That is an observation which has been made by quite a number of stakeholders. Let me quote, for example, the Association of Superannuation Funds of Australia:

… it remains unclear what the levies will actually pay for … The Explanatory Memorandum only has information on the proposed year by year funding with no further detail on what the money will be actually spent on. Given the substantial amount sought to be recovered ($467 million in total) much greater accountability should be demanded from the Australian Taxation Office.

Submitters also made the point that it would be wholly inappropriate for the Australian Taxation Office to obtain benefits funded from this specific levy on the superannuation sector which extended to its broader operations. I note that the concerns which were expressed by a number of industry stakeholders were acknowledged by the committee in its unanimous report and the committee has recommended that the Australian Taxation Office be required to provide a regular, detailed breakdown to the SuperStream Advisory Council of its costs and the expenditure of the additional levies.

Finally, I want to note that the compliance burden which will fall upon employers as a result of these changes will be a material one and it is therefore concerning that the legislative scheme adopted here is one which bristles with penalties and strict liability provisions. Employers are required to provide very detailed data associated with superannuation payments and failure to provide that data exposes them to penalties. It is not just superannuation funds which are exposed to penalties under this legislation; it is every employer including, of course, small employers. A number of stakeholders who made submissions to the committee pointed out the nature of the challenge that employers including, in particular, small employers will face in complying with this legislation. The Australian Chamber of Commerce and Industry suggested that the government ought to consider including a 'safe harbour' provision in the legislation to allow employers, who with the best will in the world find themselves unable to strictly comply, protection against being hit with arbitrary penalties. The Financial Services Council submitted that the proposed compliance measures are overly severe.

I particularly want to note concerns that the bill is bristling with strict liability provisions. A strict liability provision is one where the mental state of the person who commits an offence is deemed to be irrelevant. Accordingly, even if you set out with the best will in the world and make every reasonable effort to comply but fail to do so, you are exposed to penalties under this legislation. The Australian Taxation Office acknowledged that it would have the legal right under this legislation to impose penalties on a small employer such as a butcher with two or three employees. If that butcher were to pay the amount of superannuation contribution required for each employee when it is required to be paid, but failed to include all of the items of data included under the standard, then that butcher is open to a criminal prosecution and there is no defence open to him or her. That is the reality of what a strict liability provision means.

The committee noted its concerns that the tax office ought to be what you might paraphrase as 'gentle' in the application of these powers. I would argue that trusting the tax office to be gentle is an inherently risky proposition and this is an area of significant concern. The coalition supports these provisions in principle but we have some implementation concerns as I have outlined.