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Monday, 26 February 2007
Page: 86

Senator SCULLION (Minister for Community Services) (5:16 PM) —I move:

That these bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.

Leave granted.

The speeches read as follows—


Policy setting

Since the events of 11 September 2001, the Australian Government has adopted substantial measures to strengthen aviation security, including hardening cockpit doors, requiring passenger screening for all regular passenger jet flights, upgraded Closed Circuit Television and monitoring capability, and enhanced cargo security clearances and checked baggage screening. We have also taken measures to strengthen maritime security.

The Government is not prepared to rest on its laurels. We are committed to continuing to strengthen transport security.

In 2006, the Government announced new measures to further tighten security at Australia’s air and sea ports. It has agreed to additional expenditure of $4.7 million over four years, including $2.9 million for the establishment of a regime to audit the activities of Aviation Security Identification Card (ASIC) and Maritime Security Identification Card (MSIC) issuing bodies.

Policy objective

Last year the Australian Government agreed to establish a centralised background checking service in the Attorney-General’s Department, as part of a wider initiative to strengthen the ASIC and the MSIC schemes. The Department will coordinate background checks on people who work in the secure areas of air and sea ports, namely those who are required to have an ASIC or a MSIC.

A new division has been established, now known as AusCheck, and it will help the aviation and maritime industries to identify high-risk individuals who should not be granted an ASIC or MSIC. AusCheck will apply a more consistent approach to the statutory requirements set for each scheme and notifying the relevant bodies of the outcome of the background checks. AusCheck will operate on a cost recovery basis.

The Government also decided that AusCheck will use the proposed National Documentation Verification Service to assist in determining the bona fides of applicants. It will also maintain a comprehensive database of all applicants and ASIC and MSIC cardholders. AusCheck will operate in accordance with the provisions of the Privacy Act 1988 and ensure that information in its database is properly protected.

Once fully operational, AusCheck will also be able to manage other background checking schemes and minimise duplication of effort for individuals who need to apply for background checks for different purposes.

The decision to establish AusCheck followed a recommendation of Sir John Wheeler’s Airport Security and Policing Review and is an important part of the Government’s ongoing commitment to improve aviation and maritime security.

AusCheck is scheduled to commence operations on 1 July 2007, which will allow it sufficient time to set up the information and computer technology and business process required, conduct a Privacy Impact Assessment and consult with industry.

Outline of the bill

This bill will provide legislative authority to enable AusCheck to provide centralised background coordination and checking services for the Commonwealth, to manage a variety of schemes and to provide for AusCheck to establish a background checking scheme in its own right.

To ensure that AusCheck can be used to best advantage, and take on future background checking functions, the bill contains a series of generic background coordination and checking powers to be exercised in accordance with parameters to be defined by regulation for each scheme.

Under this approach the basic elements of Commonwealth background checking provisions will be centralised in this Act. This flexible approach facilitates applying best practice background checking across Commonwealth administration.

The bill also provides for the establishment of a database of people who apply for background checks and of security cardholders, for the transfer of existing records of applicants and card holders to AusCheck and for limits on access to, use of and disclosures from the database.

Providing for the transfer of existing records to AusCheck is necessary to minimise duplication of effort for applicants and to ensure that the database provides a comprehensive picture of the results of background checking prior to AusCheck’s commencement.


This bill provides a legislative framework and the regulations made under it will allow for the consolidation of background checking schemes. Initially AusCheck will only coordinate the checking for the ASIC and MSIC schemes. However the core framework will facilitate the possible of extension of AusCheck’s role to other background checking functions.

The creation of AusCheck as the centralised background checking service for the Commonwealth is in keeping with the public’s expectations that adequate security arrangements are in place. AusCheck will in time reduce duplication of effort where individuals require background checks for different purposes; and should in time help develop a more consistent and reliable approach to background checking.

The bill is necessary to provide legislative authority for those processes, to allow for cost recovery and to provide appropriate protections for the information that will be collected and stored by AusCheck.

The bill is another important step in improving air and maritime security specifically and national security generally.

I commend the bill.

The MARITIME LEGISLATION AMENDMENT (PREVENTION OF AIR POLLUTION FROM SHIPS) BILL 2006 amends the Navigation Act 1912 and the Protection of the Sea (Prevention of Pollution from Ships) Act 1983 to implement Annex VI (prevention of air pollution from ships) of the International Convention for the Prevention of Pollution from Ships, commonly known as MARPOL.

The bill also incorporates other miscellaneous amendments that are unrelated to Annex VI. These include changing references to “pilot” in the Navigation Act 1912 to “licensed pilot” and references in the Protection of the Sea (Prevention of Pollution from Ships) Act 1983 to ensure that recent amendments to the Act correctly reflect the recently revised Annex I of MARPOL.

Annex VI was adopted by the International Maritime Organization in September 1997 and came into force internationally on 19 May 2005.

The majority of the bill - Schedule 1 which implements Annex VI - will commence on a date to be proclaimed, this is due to the accession process required for Annex VI through the International Maritime Organization. It is intended that the commencement date will coincide with the date that Annex VI enters into force for Australia.

The bill adds a new Part to Division 12 of the Navigation Act 1912, to provide for periodical survey of Australian registered ships to ensure the ship is constructed in accordance with the Annex VI requirements, and for the issue of an International Air Pollution Prevention Certificate. Foreign-registered vessels are required to have certificates issued by their own flag States when visiting Australian ports. The bill also amends the Protection of the Sea (Prevention of Pollution from Ships) Act 1983 to define the operational measures required in relation to the carriage and use of fuel oil on board ships, including the sulphur content of fuel oil and fuel oil quality requirements.

The proposed amendments set limits on sulphur oxide and nitrogen oxide emissions from ship exhausts and prohibits deliberate emissions of ozone depleting substances. The Annex also includes a global cap of 4.5 per cent on the sulphur content of fuel oil.

Annex VI contains provisions allowing for special Sulphur Oxide (SOx) Emission Control Areas to be established with more stringent controls on sulphur emissions. In these areas, the sulphur content of fuel oil used onboard ships must not exceed 1.5 per cent. Alternatively, ships must fit an exhaust gas cleaning system or use any other technological method to limit SOx emissions.

Both the Baltic Sea Area and the North Sea are designated as a SOx Emission Control areas.

This bill continues the Government’s efforts to prevent pollution by ships and maintains the close alignment Australia has with the International Maritime Organization’s international Conventions.


It is more than twelve years since the commencement of the Native Title Act 1993, which was enacted in response to the landmark High Court decision in Mabo (No 2). It is over eight years since the 1998 amendments to the Act were passed, which included measures identified in response to another significant High Court decision, the Wik judgment. Unlike the 1993 and 1998 legislation processes, the Native Title Amendment Bill 2006 is not being introduced in response to any judicial decision. The key catalyst for the bill is the Government’s commitment to improve the performance of the native title system.

While native title matters are complex, most stakeholders acknowledge the current framework for resolving native title applications remains too costly and time-consuming. It is a matter of clear concern that many Indigenous Australians have not been able to see resolution of their claims within their lifetime, and have therefore been unable to enjoy due recognition of their rights under law. It is in the interests of all Australians, not just parties to claims, that claims are determined more expeditiously.

In September 2005, I announced the Australian Government was undertaking a comprehensive reform process examining all aspects of the native title system. The package of reforms, of which this bill is only part, is designed to ensure the system delivers effective outcomes more expeditiously for all parties, and to encourage agreement-making in preference to litigation. The Government is not seeking to disturb the fundamentally important object of the Native Title Act to recognise and protect native title. The measures in the bill do not seek to wind back or undermine native title rights and focus largely on the framework for determining native title claims.

A second bill to implement outstanding measures from the package of reforms will be introduced into Parliament early next year, and will include minor and technical amendments designed to improve the workability of the Act. Collectively, the legislative changes and other non-legislative reforms will promote performance across the system.

More effective Tribunal mediation

This bill will amend the Native Title Act to implement measures from the Claims Resolution Review, an independent study commissioned by the Government. The Review found institutional reform was needed to facilitate more effective resolution of claims, particularly with respect to the role of the National Native Title Tribunal.

The Review concluded the effectiveness of Tribunal mediation was inhibited by a lack of powers to ensure parties participate productively. The Tribunal will be given powers to direct parties to attend mediation conferences and to compel production of documents. In addition, the Tribunal will be given new review and inquiry functions on matters that go to central issues in native title claims.

Better coordination and communication between the Court and Tribunal

To limit potential for wasted resources and delay, amendments will remove potential duplication between the Court and the Tribunal and improve claims management between those bodies. The legislation will make clear mediation cannot be carried out by both bodies at the same time. The presumption is that all native title claims should be referred promptly to the NNTT for mediation, subject to specific exceptions. There should be no unnecessary delay by the Court referring matters to the NNTT for mediation.

The Tribunal’s role will be further strengthened by giving it a right to appear before the Court, and by expanding its reporting functions. The Court will be required to consider reports provided by the Tribunal when making orders in relation to relevant matters.

Behaviour of parties

Reform to the institutional framework is only part of the solution to achieving more expeditious claims resolution. The bill introduces measures directed at ensuring parties act responsibly.

A provision will be included to make clear all parties and their representatives must mediate in good faith. The Tribunal will be able to report breaches to the Court and - where relevant - to other bodies.

Claimants bear responsibility for ensuring claims, once lodged, are progressed appropriately. The Court’s power to dismiss claims that are unlikely to proceed to determination will be strengthened. Other amendments will assist in limiting the involvement of other parties in proceedings to issues which are directly relevant to their interests.

Effective and Accountable Native Title Representative Bodies

Native title representative bodies (NTRBs) are recognised under the Act to assist claimants in preparing and advancing native title applications. The bill introduces measures to ensure these bodies operate with greater effectiveness and accountability.

Under the new provisions there will be enhanced flexibility in the NTRB system including by replacing the current indefinite recognition of NTRBs with fixed terms. The changes also address anomalies and inconsistencies in how changes to NTRB boundaries can be made.

Flexibility for Prescribed Bodies Corporate

Consistent with the need for a balanced approach to the reforms, the bill also introduces amendments to the regime for Prescribed Bodies Corporate (PBCs), which are the bodies responsible for managing native title following a determination. The amendments will enable improvements to the PBC regime to accommodate the specific interests of the native title holders.

Extending respondent funding scheme to cover more agreements

Consistent with the Government’s strategy of encouraging resolution of native title claims through agreement making, the bill includes a measure to enable financial assistance to be provided in a wider range of circumstances to respondents participating in the right to negotiate process.


The reforms in this bill have been the subject of extensive consultation with stakeholders. While it does not seek to disturb the general framework governing native title, and does not undermine the existing balance of rights under the Native Title Act, the measures will provide a platform to enable more efficient and effective outcomes, which is in the interests of all Australians.

I will be continuing to work with all stakeholders to secure the promise which native title can and should offer for a better Australia.

I commend the bill.


This Government is committed to choice in health care. Ever since we came to office we have backed this commitment with measures that enable Australians to exercise this fundamental right. Initiatives such as the 30 per cent Rebate, the increased rebate for older Australians, No Gap and Known Gap arrangements, the Medicare Levy Surcharge and Lifetime Health Cover are important measures the Government has implemented in recent years. They all enhance choice, certainty and the value of private health care.

The Government’s strong commitment to choice in health care ensures a viable and sustainable private health sector and in turn it improves the capacity of the public hospital system to deliver services to the Australian community. It also gives millions of Australians, millions of whom are on low and fixed incomes peace of mind. They know that when something serious happens to them they can face the trauma of hospital and medical care with the freedom to choose their doctors and places of treatment.

It is a matter of pride for the Government that these measures have halted the slide in private health insurance membership that we inherited. From just over 30 per cent seven years ago, private health insurance membership has stabilised around 43 per cent of the Australian population. Private hospital admissions, mostly funded by private health insurance, now account for almost three-fifths of all surgical procedures. Medical practitioners who work in the private sector, again largely funded by private health insurance, earn a return on their efforts that makes them willing to do the sessional work in the public sector on which our public hospitals depend.

But the task of revitalising the private health sector is ongoing. Having consolidated the sector, the next step is to help it adapt to the realities of early 21st century health care: a way of care that doesn’t always centre on being admitted to hospital. Day procedures, outpatient services, hospital in the home, condition management and wellness and prevention are all part of the health care equation in a way that simply wasn’t envisaged when the current regulatory regime was devised over half a century ago. These things are inadequately covered by private health insurance as it’s currently regulated, and this needs changing.

This package of Bills, which will come into effect from 1 April next year, therefore supports the next wave of innovation. It will enact the important reforms to private health insurance I announced on 26 April 2006. These changes will translate into greater competition and improved services for consumers. The changes will also mean much clearer and simpler regulation for health insurers and service providers.

This package will create new opportunities for the private health sector, allowing greater innovation and even greater choice in private health care. When implemented, the legislation will be a win for consumers, a win for private health insurers and a win for service providers - and a win for our public hospital system too.

Before explaining the legislation, I would like to reiterate the Government’s ongoing and very strong commitment to Medicare. This package of Bills will not diminish that commitment. It will not result in a two-tier system. Let me be very clear. There will be no diminution in cover by Medicare as a result of these reforms.

Private Health Insurance Bill 2006

The main Bill, the Private Health Insurance Bill 2006, is a significant piece of legislation. It sets out a comprehensive regulatory framework for the private health insurance sector. This will replace the current regime, which is mainly set out in the National Health Act 1953, the Health Insurance Act 1973, and the Private Health Insurance Incentives Act 1998.

This bill contains important measures for consumers including Broader Health Cover, standard product information, a comparative website for consumers, and changes to Lifetime Health Cover for those with ten years continuous cover.

By far the most significant new measure is the introduction of Broader Health Cover. Hospital cover will expand to cover out of hospital services that substitute for or prevent hospital care. This is a groundbreaking change. Health insurers will now have the choice to offer it to the almost nine million Australians with hospital cover.

We are removing the legislative barrier to health insurers paying benefits for out of hospital medical services. Broader Health Cover will apply to services that can safely be delivered outside a hospital and which substitute for or prevent hospital care. This will potentially include a wide range of services, such as dialysis and chemotherapy, allied health services and domestic nursing assistance.

It also will allow health insurers to work with a wide range of service providers to develop more flexible and innovative products that reflect modern clinical practice and consumer expectations. Health insurers will be able to better assist consumers to manage and prevent acute and chronic conditions. Many people can benefit from tailored programmes that support and sustain healthy lifestyles, and might include services such as personalised health checks, dietary guidance, exercise supervision, and support to quit smoking. Ancillary cover will continue to provide access to the same range of services as at present, when these are not provided as part of such a programme.

Some things will not be covered under Broader Health Cover, including:

  • general practice services;
  • specialist and physician consultations that attract a Medicare rebate; and
  • the costs of normal residential accommodation in aged care facilities.

Consumers can expect products that offer greater convenience and choice, and relevance to their needs all of the time, not just when they need to go to hospital. Broader Health Cover policies will be fully covered by the Government’s private health insurance rebates.

The bill also ensures that the contracts that doctors have with insurers may not limit the clinical freedom of doctors to choose the most appropriate treatment for their patients. This new cover is not a vehicle for American-style managed care.

Effective choice depends on information. Consumers will benefit from new requirements on insurers to produce standard information statements for their products. These information requirements will help consumers to compare health insurance policies and to understand their entitlements under them. This will assist consumers when they are shopping around for cover and, importantly, when they need to use their cover. Combined with the Government’s efforts to ensure informed financial consent so there are no hidden cost surprises when people use their insurance, this is an important step.

With funding announced in this year’s Budget, the Private Health Insurance Ombudsman is developing a website to present this information to further assist consumers with their private health choices.

As the Government announced earlier this year, the ministerial role in reviewing private health insurers’ premium applications is being retained. This is an important consumer protection, as well as safeguarding the Australian people’s investment in the private health insurance rebate. As part of the annual premium application process the Government will give informal advice to the industry on the factors the Minister will take into account in considering proposed premium increases.

The Government previously announced that it would legislate to provide annualised health insurance contracts, so that a member would not face more than one rate adjustment in any one premium year. However, after extensive consultation with industry and employers handling salary deductions for private health insurance, the Government has decided not to proceed with this measure on the grounds of expense and efficiency.

Indeed, the Government is very pleased that the industry has been behaving responsibly and maturely in regards to helping its members through rate changes. We are particularly happy that funds have honoured prepaid contributions applying after a rate change, and in lieu of legislation we expect this responsible self-regulation to continue.

This bill also includes a major change to Lifetime Health Cover. People who have retained their private hospital insurance continuously for more than ten years will no longer be subject to Lifetime Health Cover penalties. This recognises and rewards people who have made the effort to maintain their cover over time, having first joined after the age of 30. They have made the effort and they deserve credit for their commitment and loyalty.

Efficiently-run health funds mean lower overheads and lower pressure on premiums. This bill thus includes significant regulatory reforms. The aim of these changes is to make private health regulation clearer and simpler, to help health insurers to run their businesses more smoothly and to work with service providers to devise new products that better meet consumer needs.

The first such measure changes the focus of regulation from insurers to products. Under the existing arrangements, product regulation is achieved through an arcane set of conditions of registration imposed on insurers. Currently insurers are subject under the National Health Act to no fewer than 48 conditions of registration, and could be deregistered for breaching any of them. This is as clumsy as it is onerous.

This system will be replaced by a transparent set of product standards. At the heart of these standards will be the notion of complying health insurance products. Insurers will have clear obligations relating to community rating, premiums, benefits, waiting periods and portability, and the provision of standard information.

By regulating products not providers we are opening the door more widely to potential new entrants into the private health insurance industry, and for the possibility of existing health insurers to adapt their businesses to current market conditions and consumer demands.

The bill also includes offence provisions for breaching the new product standards, including penalties for insurers that fail to comply with essential information requirements under the Act. The penalties in the bill are the maximum penalties allowable, and it will be open to a court to impose a lesser penalty depending on the magnitude of the offence.

Chief executive officers and directors can be held personally liable only if they do not exercise due diligence in putting in place systems to make sure that insurers comply with the product standards. In addition, however, the normal Corporations Act governance and conduct requirements for directors will continue to apply, as they do to any other company subject to that Act.

The Government’s intent is to align health insurer director and chief executive obligations with general practice. Therefore, the directors of insurers other than just mentioned will not be liable personally for any breach of the new Act by insurers that constitutes an offence. The corporation, not the individual board members and chief executives, will be held accountable instead. Poor governance and decision-making is more properly a matter for members where the fund is a mutual corporation and, in the case of any future for-profit insurers, shareholders.

It should also be noted that the majority of the offence provisions in the bill currently exist in health insurance legislation. The few new offence provisions, while industry-specific, have been framed to maximise consistency with existing Commonwealth law.

The second significant regulatory measure is the clarification of the operating rules relating to health benefits funds. While insurers are required to have health benefits funds under the existing arrangements, there are no clear requirements on the conduct of such funds.

The bill sets out a framework for the establishment, operation, merger and termination of these funds. This will require that the assets of the health benefits fund only be used to meet the liabilities arising from the health insurance business, or any health related business, as well as any management costs. Insurers registered to operate on a for-profit basis may withdraw money for other purposes if the capital adequacy and solvency standards are not breached.

The new health benefits funds provisions will improve prudential oversight and protection of the public interest. They will also make it easier to re-structure or amalgamate insurance businesses. And by drawing a clear line between the wider business of the insurer and the business of the fund, the bill will also make it easier for new entrants to access the market.

The bill also clarifies aspects of the role of the Private Health Insurance Administration Council (PHIAC) in supervising insurers and their health benefits funds. The current ability for PHIAC to set capital adequacy and solvency standards will be maintained, together with the ability to direct insurers to take action to meet the standards. The bill will also allow PHIAC to set prudential standards for insurers.

The bill allows for subordinate legislation known as the Private Health Insurance Rules to be made by legislative instruments. The Rules will:

  • continue current default benefit arrangements;
  • maintain front end deductible limits for hospital products; and
  • restrict eligibility for the private health insurance Rebates to people who are eligible for Medicare.

The bill also includes a number of smaller but significant measures that simplify and reduce regulation, including the simplification of the Lifetime Health Cover rules and the rewriting of the rules around waiting periods and portability requirements.

The Government has also made an undertaking to the industry to review the operation of the legislation as industry develops to meet its requirements over the next few years.

The Government is committed to ensuring that consumers can make a genuine choice between the private and the public sector when it comes to health services.

It is time for the legislation underpinning the private health sector to reflect the current objectives of the Government’s private health policies and allow the private health sector to evolve into the future.

This legislation not only protects consumers’ interests but ensures through clarity of expression and simplification of regulation that private health insurers are free to focus on their core business.

The Government has worked co-operatively and constructively with the private health sector in developing this legislation. I have also given an undertaking that I will consider further comments over the summer recess and that I am prepared to introduce Government amendments to give effect to refinements and suggestions that are consistent with the Government’s policy objectives.

Our aim is to make private health insurance more attractive, affordable and flexible than it has ever been before. If it is to maintain and increase its role complementing the public sector, the whole private health industry - not just health funds, but doctors, hospitals and other providers - must be prepared to adapt and to work together to achieve lasting changes that benefit all Australians.


This bill provides for the transition from the current regulatory regime to the new Private Health Insurance Bill. It also provides for the repeal of redundant Parts of the National Health Act 1953 and Health Insurance Act 1973 and makes amendments to a range of other Acts, mainly to reflect changes in the definitions of insurers and the products they offer.

An important transitional measure of this bill provides that facilities that were declared as hospitals under the National Health Act 1953 or Health Insurance Act 1973 will be taken to be public or private hospitals under the proposed new Act until 1 July 2008. This provides a period for hospitals to make an application to be declared a hospital under the proposed new Act.

This bill also provides for outreach services declared under the National Health Act 1953 to be treated as hospital treatment under the proposed new Act until 1 July 2008.

The bill provides a transitional registration regime for organisations registered as insurers under the National Health Act 1953 to be taken as private health insurers under the proposed new Act until 1 July 2008. To ensure consistent standards of good governance the bill will also require all existing health insurance providers to be corporations registered by Australian Securities Investment Commission by 1 April 2008.

The bill also clarifies that a health benefits fund conducted by an insurer registered under the National Health Act 1953 that existed before the commencement of the proposed new Act, including all of its assets and liabilities, is taken to be a health benefits fund under the proposed new Act


This bill imposes listing and application fees on prostheses sponsors to recover the costs of evaluating and listing prostheses for private health insurance purposes.


This bill amends the Private Health Insurance (Collapsed Organization Levy) Act 2003 to update definitions resulting from the replacement of the National Health Act 1953 by the proposed Private Health Insurance Act.


This bill amends the Private Health Insurance (Complaints Levy) Act 1995 to update definitions resulting from the replacement of the National Health Act 1953 by the proposed Private Health Insurance Act.


This bill amends the Private Health Insurance (Council Administration Levy) Act 2003 to update definitions resulting from the replacement of the National Health Act 1953 by the proposed Private Health Insurance Act.


This bill amends the Private Health Insurance (Reinsurance Trust Fund Levy) Act 2003 to update definitions resulting from the replacement of the National Health Act 1953 by the proposed Private Health Insurance Act.


When the Treasurer handed down the 2006-07 Budget on 9 May this year, he announced the most significant reforms to the taxation of superannuation in Australia’s history.

The reforms were received positively throughout the community, including by some who are not usually complimentary to the government. Former Labor minister Susan Ryan wrote on 12 May 2006 that:

Costello’s uncharacteristically bold and effective plan to simplify super and reduce its taxes should be commended.

She went on to say:

Maybe faced with the Treasurer’s bold gazumping of Labor’s cherished but slightly shabby super property, the opposition will find the resolve to get another big picture worked out and the wherewithal to let voters know about it.

Garry Weaven, industry fund advocate and former ACTU office-bearer, wrote in June that:

The Government’s recent budget initiatives have proved that the Liberal Party is now the official party for superannuation.

The Institute of Actuaries stated in May that it:

… strongly applauds the Government’s ‘big bang’ approach to the Budget reforms. This approach instantly reduces the complexity caused by ‘grandfathering’ of the previous tax changes ... the tax reductions and simplification measures announced in the Budget present a huge step forward in the evolution of Australia’s retirement income regime.

The amendments in this bill implement the government’s superannuation plan. The reforms will sweep away the current raft of complex tax arrangements that apply to superannuation, improve incentives to save, increase retirement incomes, and strengthen incentives for older Australians to stay in the workforce.

Australia’s superannuation system has become increasingly complicated as a result of changes that have occurred over the last two decades. The complexities in the current tax arrangements for superannuation benefits discourage people from saving for retirement. If people cannot easily understand what they will receive from their superannuation, they will have less confidence in the system. This confuses retirement decisions and clouds the incentive to invest in superannuation.

The simplified superannuation reforms will encourage people to take a greater interest in their superannuation and give people greater confidence to make additional savings. The earlier people contribute, the greater the benefits they will be able to reap from the low-tax and long-term investment environment which is available in the superannuation system.

The amendments in this bill are also an important part of the government’s commitment to reduce the complexity of the tax law, regulatory burdens and compliance costs faced by taxpayers. The reforms will cut the number of pages of superannuation law in the income tax assessment acts by over a third.

Under the new rules, in the vast majority of cases, for the 90 per cent of Australians in taxed schemes the tax treatment of their superannuation benefit will be covered in one paragraph of law if they access their superannuation after age 60. That paragraph will be, ‘No tax on lump sums and no tax on pensions.’

The centrepiece of this bill is that Australians aged 60 or over will be able to access their superannuation benefits tax free if they are paid from a taxed superannuation fund. Retirees will pay no tax on lump sums and no tax on superannuation pensions. Reasonable benefit limits will be abolished. Cutting taxes will encourage saving and improve retirement incomes. A lower rate of tax and simplified arrangements will also apply to superannuation benefits paid from an untaxed fund to people aged 60 and over.

Retirees will pay lower taxes on their work income once they start drawing on their superannuation, thereby removing the current disincentive for older Australians to remain in the workforce. Improving productivity and sustaining workforce participation are integral to reducing the fiscal pressure of Australia’s ageing population.

Further improvements in incentives to save will be achieved by the halving of the pension assets test taper rate from $3 to $1.50 per fortnight for every $1,000 of assets above the relevant threshold. Pensioners currently have to achieve an after-tax return of 7.8 per cent on their additional savings; otherwise they lose more age pension than they generate in income on their savings. The halving of the taper rate will reduce the break-even rate of return to 3.9 per cent. Those who will benefit from the halving of the pension assets test taper rate include not only recipients of the age pension, but also disability pensioners, people receiving the carer payment, Department of Veterans’ Affairs service pensioners and recipients of the wife pension, widow B pension and bereavement allowance.

The bill introduces simple and streamlined contribution limits to replace age based limits. Concessional contributions made from pre-tax moneys will be limited to $50,000 per person per year. A transitional limit of $100,000 per person per year will apply for anyone aged 50 or over up to the 2011-12 financial year. Employers will be able to claim a full tax deduction for contributions to superannuation on behalf of employees under age 75.

To ensure superannuation tax concessions are targeted appropriately, a limit of $150,000 per person per year or $450,000 over a three-year period will also apply to contributions from post-tax income. A transitional cap of $1 million on post-tax contributions will apply between 10 May 2006 and 30 June 2007. These arrangements will allow people who were planning larger contributions under the existing rules to continue with their plans. Contributions will still be subject to any applicable work test. Proceeds from the settlement of an injury resulting in permanent disablement will be exempt from the cap on post-tax contributions.

The bill also strengthens contribution incentives for the self-employed by bringing them into line with those for employees. The self-employed will be allowed to claim a 100 per cent deduction for all contributions to superannuation, compared to the 75 per cent deduction they currently receive for contributions above $5,000, with a maximum deduction equal to their age based limit. Individuals will be able to contribute up to $1 million over their lifetime from the sale of eligible small business assets, over and above the cap on post-tax contributions. In addition, the government’s highly successful co-contribution scheme will be extended to low- and middle-income self-employed people.

Under the reforms concessions on large employment termination payments will be limited. Currently, both superannuation and employment termination payments are counted together in assessing whether a person exceeds their reasonable benefit limits. As the reasonable benefit limits are being removed for superannuation benefits, it is necessary to apply an upper limit on the amount of employment termination payments that receive concessional tax treatment.

In order to ensure the integrity of the generous taxation concessions given to superannuation, it is necessary to ensure that tax file numbers are quoted for as many superannuation accounts as possible. Increased TFN quotation will also, over time, lead to better matching of people with their lost superannuation benefits. Where a tax file number is not quoted, a higher rate of tax will be imposed on concessional contributions, in a similar way to the higher rate of tax imposed on bank account interest, wages and dividend income where a tax file number is not quoted. People will generally have until 30 June 2008 to quote their tax file number if they have not already done so, before the higher rate need apply. The additional tax will be refunded where people subsequently quote their TFN within four years.

When an individual reaches age 65 and cannot be contacted by their fund, their superannuation benefits become unclaimed money and are paid to the government of the state or territory in which the superannuation fund is based. These moneys are held in trust by the relevant government until claimed by the rightful owner or their estate. This results in a fragmented system for individuals searching for unclaimed superannuation, particularly if they have worked in numerous states or their fund was based in a different state to that in which they were employed. These arrangements are not optimal for older Australians trying to find their superannuation.

The Australian government is significantly enhancing the policy and administrative framework to ensure that individuals receive the full benefit from their superannuation savings. The government has provided a significant increase in resources for the ATO to reduce the amount of money held in lost accounts. This includes rationalising existing processes to identify actual lost members; more comprehensive reporting from funds; an extensive letter campaign to lost members in 2007-08 and 2008-09; establishing a web based tool for locating lost accounts; and, by 2009-10, enabling members to electronically request consolidation of their accounts through the ATO website.

The Australian government will now take full responsibility for the management of unclaimed superannuation, which means that, in future, unclaimed superannuation money will not be paid to the states or territories. This is consistent with the arrangements for lost superannuation and provides a single access point for individuals searching for lost or unclaimed superannuation and a simpler nationalised claims process going forward. As a result, individuals will be able to seek advice directly from the ATO on any superannuation related issue, without having to contact numerous government agencies.

These changes will not affect state and territory government superannuation schemes.

The Australian government is investing significant resources in these changes to assist more individuals to access all of their superannuation at retirement.

In addition to implementing the government’s reforms, the bill also rewrites the superannuation tax law into the Income Tax Assessment Act 1997 to present a clearer picture of the taxation of superannuation savings across the life of the superannuation investment. Currently, provisions are located in different parts of the old legislation and not in a logical sequence.

Significant improvements have been made to the law which will make it easier to use by taxpayers and practitioners. These include the use of plain English contemporary drafting, guides to sets of rules and the grouping of rules on a case-by-case basis. These improvements will aid in reducing compliance costs and the regulatory burden faced by business and other taxpayers. They also demonstrate the government’s commitment to responding to the report of the Taskforce on Reducing Regulatory Burdens on Business, Rethinking regulation, which recommended that high priority be given to comprehensive simplification of the tax rules for superannuation.

Over 10 million individuals, 1.3 million employers and more than 310,000 superannuation funds are potentially affected by these extensive reforms. This bill represents a substantial investment by the government in the standard of living of Australians in retirement and demonstrates its commitment to addressing the challenges of Australia’s ageing population. The streamlined superannuation system established by this bill is another major step along the path of ensuring Australia maintains a prosperous and stable economy for future generations.

Full details of the measures in this bill are contained in the explanatory memorandum.


This bill is a companion bill to the Tax Laws Amendment (Simplified Superannuation) Bill 2006.

The purpose of the bill is to impose excess concessional contributions tax to give effect to the limit on non-concessional contributions to superannuation.

Full details of this bill are contained in the explanatory memorandum already presented.


This bill is a companion bill to the Tax Laws Amendment (Simplified Superannuation) Bill 2006.

The purpose of the bill is to impose excess non-concessional contributions tax to give effect to the limit on non-concessional contributions to superannuation.

Full details of this bill are contained in the explanatory memorandum already presented.


This bill is a companion Bill to the Tax Laws Amendment (Simplified Superannuation) Bill 2006.

The purpose of the bill is to impose the top marginal tax rate, plus Medicare levy, on excess lump sum payments made from untaxed schemes—that is, lump sum payments in excess of $1 million. These arrangements ensure comparable treatment of taxed and untaxed schemes, given annual contribution limits apply to taxed schemes.

Full details of this bill are contained in the explanatory memorandum already presented.


This bill is a companion bill to the Tax Laws Amendment (Simplified Superannuation) Bill 2006.

The purpose of the bill is to replace the Income Tax (Superannuation Payments Withholding Tax) Act 2006 to reflect the new components of superannuation benefits created by the Simplified Superannuation Bill. It realigns the tax treatment of Departing Australia Superannuation payments with the new superannuation taxation regime that applies from 1 July 2007.

Full details of this bill are contained in the explanatory memorandum already presented.


This bill is a companion Bill to the Tax Laws Amendment (Simplified Superannuation) Bill 2006.

The purpose of the bill is to facilitate the collection of a self-managed superannuation fund’s supervisory levy with its income tax liability, by removing the current specific penalty for late lodgement of a fund’s regulatory return. This will allow the general interest charge to be applied for late lodgement of the return, consistent with income tax arrangements.

Full details of this bill are contained in the explanatory memorandum already presented

Debate (on motion by Senator Scullion) adjourned.

Ordered that the bills be listed on the Notice Paper as indicated at item 14(c) of today’s Order of Business.