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Tuesday, 22 June 2010
Page: 6174

Mr HAYES (8:10 PM) —I rise in full support of the Tax Laws Amendment (2010 Measures No. 3) Bill 2010. This is a bill that will help cement the role of Australia as a leading financial hub in the Asia-Pacific region. These important reforms allow Australian managed funds and other businesses to compete on the world stage to ensure they can continue to grow, increase services exports and support more jobs. This bill is part of a larger financial sector reform being undertaken by the Rudd Labor government to ensure the economy remains strong and future growth is not stifled.

The events of late 2008 and early 2009 reminded us that the world’s markets and economies can be fragile. We need the type of vision that the government has brought to this particular piece of legislation to ensure our country is in the best possible position to attract foreign investment and bolster domestic markets. We also need to make sure that hardworking employees are supported and encouraged to invest their funds through superannuation in this country.

This bill continues the government’s support of low-income earners by permanently maintaining the current co-contribution that is payable on a person’s eligible superannuation contributions. Essentially, the government will match dollar-for-dollar the contributions workers make to their own superannuation up to a limit of $1,000 where a worker is earning below the threshold of $31,920. The contribution reduces by 3.33c for each dollar by which the person exceeds that threshold of $31,920. This is a critical support for low-income earners. Superannuation, as we all know, is a lifeline for many people heading towards their retirement. It takes people many years in the workforce to accumulate a nest egg to help support themselves when their working days are over. Therefore, this co-contribution is a very strong incentive to encourage people to save for their retirement. It is something sound and this legislation is going to permanently ensure that it occurs and is available.

We all recognise that Australia has an ageing population. The recent Intergenerational report leaves no doubt that our ageing population will place substantial pressure on our economy and the budget over the coming 40 years. That is why it is important to recognise the activities of the former government of Bob Hawke and Paul Keating. They had the foresight to introduce compulsory superannuation and policies to grow the superannuation system. I know that it certainly was not greeted universally on all sides of the House.

Prior to the Hawke-Keating superannuation legislation, it was only those people who had award based super who could make provisions for themselves throughout the industrial ranks. The Hawke-Keating legacy ensured that all Australians would have superannuation so that they could make provision for their retirement—not just the privileged, those in the public sector or those who had the unions negotiating on their behalf for industrial based superannuation.

Superannuation is a topic I regularly discuss with constituents in my electorate of Werriwa. Unfortunately, the majority of constituents—they certainly do not come to me for financial advice—need to talk about the early release of their superannuation funds to tie them over during distressing periods in their lives. People who find themselves on the brink of losing their house because they cannot make mortgage repayments or people who, for a number of reasons, may find themselves in a very depressed financial situation come to us asking whether they can do something about it because they know they have a nest egg put away. They feel the need to make an early call on that nest egg to overcome some temporary financial difficulties which they have to endure. We know that there are limits to which people can participate in early withdrawal because the purpose of superannuation is to provide retirement income. These meetings are poignant reminders that superannuation is more than an investment for retirement; it really can be a lifeline for those who need financial help the most.

This leads me to another aspect of the bill of which I am particularly proud—that is, providing a lifeline for people in our community with a severe disability. As I have said on many occasions in this House, the south-west of Sydney has a disproportionately high number of people who are living with a disability. I can assure you that there is nothing in our water supply. This clearly is related to the cost of living because people catering for family members who have disabilities have very high costs. Every parent desires to give their kids the best start in life and we all want the best for our children. It is the same for parents who have a child with a disability. Some of the parents are in their 80s—85 in one instance. They talk about their children who are sometimes in their 60s. I am constantly asked, ‘What is going to happen when I go?’

More and more families are making provision for their children into the future. Special disability trusts were introduced in 2006 to allow private financial provision for the current and future accommodation needs and care of a family member with a severe disability without being affected by the social security rules on means testing or gifting provisions. Through this bill, the government is removing the barriers which prevent families from making these financial contributions. Unfortunately, take-up of these special disability trusts has been disturbingly low.

As I understand, in the first three years of the program, there have been only 52 trusts operating with 326 eligible beneficiaries. In October 2008, the Senate Standing Committee on Community Affairs reported that the tax arrangements that apply to special disability trusts diminish their value for carers and people with disabilities. These amendments ensure that the taxation of the expended income of the trust is not a disincentive to the establishment of a special disability trust. Any unexpended income of a special disability trust under these provisions will now be taxed at the beneficiary’s personal income tax rates, rather than the highest marginal tax rate plus the Medicare levy. By removing these barriers, the special disability trusts will become a more attractive tool for families who are looking to provide for the long-term care of a family member with a severe disability.

I cannot understate my belief that it is the moral responsibility of all governments to ensure people with a disability are not marginalised and certainly are not forgotten. We need to do everything we can to look after people in the community who care for people with a disability. As I have stated, there are a number of beneficial outcomes from this bill in that respect. The bill provides clarity and certainty about the operation of the capitalisation rules for authorised deposit-taking institutions to take into account the changes to financial reporting standards that occurred in January 2005. It provides for a clearer definition of a managed investment trust so that it is more closely aligned to the definition of the withholding tax.

It is imperative to remember that this government has reduced the rate of final withholding tax from 30 per cent to 7.5 per cent, down from what was the highest rate in the world to effectively now the lowest. This has undoubtedly enhanced the competitiveness of the Australian managed funds industry in attracting future foreign investment.

Finally, this bill will remove the potential conflicts between Australia’s national security interests and obligations imposed by Commonwealth tax laws. It will allow the Director-General of Security and the Director-General of the Australian Secret Intelligence Service to declare that a specific entity is not subject to Commonwealth tax laws in relation to a specified transaction. This will ensure that the tax authorities will not need to obtain information that should remain secret in the interests of national service. I would be very surprised if any member of this House would argue this particular amendment is not necessary.

Overall, this is a very good bill for Australia’s economy and Australia’s people. It helps position Australia as a financial hub in the Asia-Pacific region. It ensures that hard-working members of the workforce are rewarded for taking responsible steps to ensure their superannuation can be relied on to support them throughout retirement. It removes taxation barriers, allowing families of a person with a severe disability to ensure the long-term care and accommodation needs of their loved one are taken care of. I wholeheartedly commend this bill to the House.