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Wednesday, 9 October 1991
Page: 1621

Mr WILSON(11.03 p.m.) —-This evening I want to talk about the Estimates for the Department of Social Security and place that expenditure in a broader picture. I have been arguing in recent times that there is a need in Australia to reshape the general settlement which characterises the relationship between individuals and the State, between the people and their government. We need to redefine the role of government and we need to understand clearly what is expected of individuals, and individuals need to understand what they can expect from their governments. The tax and social security system that the present Government has developed while it has been in office is confusing, unfair and misdirected. It penalises those who aim to achieve self-reliance and it encourages others to interdependency.

I think we need a tax and social security system that does not penalise those who take responsibility for their own expenditure; that recognises that all taxpayers should, according to their means, contribute to the cost of providing for the social expenditures required by the needy; that relieves the self-reliant of any tax burden which would otherwise be paid to fund those who could afford to be self-reliant but choose, for whatever reason, not to be so; that levies taxes on individuals on the basis of their capacity to pay, taking into account the extent to which they meet their own social expenditure responsibilities; and that builds capacity to pay taxes into the tax benchmark, rather than seeing them as a revenue forgone expense of government.

Having made those general introductory remarks, I want to talk particularly about the interface between the developments that are occurring in superannuation and the social security pension. In superannuation we have a mishmash of arrangements. They can be identified by the fact that recent evidence has come to light that the Superannuation and Insurance Commissioner, charged with the implementation of retirement benefit limits, or RBLs, anticipated that he might get 200,000 people making inquiries. How many inquired? There have been over 400,000 inquiries. So there is a huge constituency of people involved in superannuation who sought information about their position, and it is not clear either that they understand the information that they are being given or even that the information is necessarily correct.

This comes about because we have tax arrangements for employees who have employer support beyond award superannuation different from those that apply to employees with employer support limited only to their award superannuation; we have another tax regime affecting the self-employed and employees with no employer support; and we have a tax arrangement that applies to employers who make contributions to superannuation funds. Then we have another situation whereby the income of superannuation funds is subject to tax under a great variety of confusing arrangements, and then, when benefits are paid, often lump sum tax is paid also, under a whole range of confusing arrangements.

I believe that that whole mishmash should be abolished and the system totally reformed. I think it is very strange that we have in this country a situation where we provide a flat rate pension to those who reach retirement and satisfy an assets test and an income test--two tests that have become more and more confusing the longer the Hawke Government has remained in office; more and more punitive and more and more discouraging to those who would provide for their own retirement. But, if they qualify, they get a flat rate pension. We say, `Oh, we have an ageing population', and there is a huge expenditure there through the Department of Social Security because of the increasing numbers reliant on that full social security pension--and we keep it flat rate. In superannuation we have this confusing tax regime that I have just referred to, and we give tax benefits, rebates, concessions--tax sheltering--on an earnings related basis.

The tax system in that regard favours the affluent and penalises the poor. That tax system is a regressive tax system, and there are a huge number of loopholes being increasingly taken advantage of by those who want to minimise the tax that they would pay. The whole system could be and should be simplified. A person who reaches 65 who is entitled to the full age pension because he or she satisfies the income or assets test is, in effect, given a government present that is worth between $75,000 and $100,000. It comes out of funds that he or she has probably contributed to during his or her working life by paying taxes over the years, and, although it is not funded, that contribution can properly be regarded as having been made under a pay as you go system.

The indexed pension that is payable to a married man or woman at the age of 65 could be purchased from a life insurance superannuation company or society for approximately three times average weekly earnings. That is the reward that is given for having paid taxes. Why do we not acknowledge that that is what is needed to fund a modest level of income on which people can retire and live in some reasonable and dignified comfort? Having acknowledged that, why do we not say that everyone will be entitled to it?

In this computer age those people who want to provide for themselves and get tax benefits should be entitled to three times average weekly earnings--or whatever the value of that pension is--in the form of tax deductions or tax rebates over their working lives. One would have to work out the discounted cash flow value of taking those rebates early rather than taking them late. People who provide for themselves should get no more and no less in benefit and value through the taxed social security system than those who draw directly on the social security system.

That would make a huge difference. It would need a phase-in process, but I believe that it could be phased-in as we have done with a lot of other sensible reforms. We would say to people, `Yes, we hope that you will provide for your own retirement. We will encourage you to do that by recognising that if you didn't save you would get the age pension but, if you do save, you can draw those tax rebates into your superannuation fund'.

I have said before in this House that it is becoming a matter of increasing concern to retirees and to those saving for their retirement that their funds are being conscripted into superannuation funds which are selected for them by their employers and by their unions. Australians want to be able to invest their own superannuation savings. They should be entitled to do so. The only obligation that they should be called upon by the Government to give is to guarantee that when they reach retirement they will have those resources available to provide them with a stream of income or the assets that will purchase that stream of income. That could be done by enabling average Australians to take out their own money, invest it where they want to and purchase from an insurance company what I would describe as a performance bond. (Time expired)