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Thursday, 29 November 2012
Page: 13892

Mr SHORTEN (MaribyrnongMinister for Financial Services and Superannuation and Minister for Employment and Workplace Relations) (10:18): I move:

That this bill be now read a second time.

Schedule 1 to the Superannuation Legislation Amendment (Reducing Illegal Early Release and Other Measures) Bill 2012 amends the Superannuation Industry (Supervision) Act 1993 to introduce civil and criminal sanctions for a person who promotes a scheme that has resulted, or is likely to result, in the illegal early release of superannuation benefits.

I would initially like to put some context around this bill.

Australia's superannuation savings pool stands at $1.46 trillion and grew, I am pleased to report to the House, 13 per cent over the year to September 2012.

We hear a lot of doom and gloom about superannuation from some conservative commentators, but the fact our retirement savings grew at a double-digit rate should give Australians and the financial services industry some cause for confidence.

In fact, last week ANZ launched its new Smart Choice superannuation product, which has been designed with the government's MySuper reforms in mind.

The ANZ press release said this about the government's MySuper reforms:

We support recent Government initiatives such as MySuper, which make superannuation more transparent, less complex and easier to track and ANZ Smart Choice Super has been developed with these objectives in mind.

The Association of Superannuation Funds of Australia had this to say about MySuper in August of this year:

MySuper offers Australian workers a super account with defined fees, no commissions and a highly transparent investment approach. This is like the "Heart Tick" on food: To be called MySuper, all ingredients must be disclosed and products must meet certain standards and be authorised by the Australian Prudential Regulation Authority.

Together with the ING Living Super launch in September, it is a clear signal that the retail industry is embracing the MySuper reforms and launching new, simple and affordable products.

Far from creating red tape, what the lived experience is showing is the government's MySuper reforms are driving innovation and are having an early 'hip pocket' impact by forcing downward pressure on fees and charges.

Turning to other aspects of the government's reforms, the Super System Review found that stronger sanctions must exist to deter promoters of illegal early release funds from undermining the government's retirement policy and harming members in the process.

Promoters of illegal early release schemes have in the past exploited vulnerable people within our community who may not be fully aware of the rules regarding accessing superannuation benefits. These new penalties will deter promoters from taking advantage of these people and help protect the superannuation savings of all Australians.

Some schemes have facilitated up to $8 million in illegal release of superannuation benefits with an average amount accessed of around $20,000. Promoters have been found to take fees of up to 50 per cent of the member's superannuation balance. In some cases, promoters have gone further and actually stolen the entire balance or exploited members' identity data for other criminal purposes.

Currently, there are no specific penalties for promoters of illegal early release schemes who are not themselves trustees of a regulated superannuation fund. Often a promoter will not be a trustee of a purported superannuation fund used in a scheme, but instead recruit parties for this role.

This measure delivers on the government's announcement that it would introduce penalties to deter promoters of illegal early release superannuation schemes. It will allow the commissioner to seek civil and criminal penalties for those who promote illegal early release schemes.

The promoters of illegal early release schemes will face civil and criminal penalties including a fine of up to $340,000 (2,000 penalty units) and/or imprisonment of up to five years.

The review also found that those individuals who gain illegal early access to their superannuation benefits should not enjoy the same tax treatment as those who legally gain early access to their superannuation benefits. The review recommended that amounts released by illegal means should be subject to the superannuation fund non-complying tax rate of 45 per cent. The Income Tax Rates Amendment (Unlawful Payments from Regulated Superannuation Funds) Bill 2012 imposes the superannuation non-complying fund rate of 45 per cent on those amounts that are released early by illegal means.

The commissioner may however determine that is it unreasonable to subject amounts released by illegal means to superannuation fund non-complying tax rate of 45 per cent, having regard to the nature of the fund and the circumstances of release.

These measures will ensure strong sanctions are in place to deter the illegal early release of superannuation.

Schedule 2 to this bill amends the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 to require that superannuation benefits that are rolled over into self-managed super funds are captured as a designated service.

The Super System Review noted that since trustees and members of SMSFs are generally the same, there is greater scope for assets, once received in the self-managed superannuation fund, to be diverted for illicit purposes.

By capturing rollovers into self-managed superannuation funds as a designated service under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, the transferring superannuation fund will have to comply with a range of obligations, including customer identification requirements and reporting obligations.

This measure will ensure that consideration is given to the money laundering and terrorism financing risks associated with the rollover of assets to a self-managed superannuation fund and that appropriate customer identification and reporting obligations exist when assets exit the prudentially regulated superannuation sector.

Schedule 3 to this bill amends the Superannuation Industry (Supervision) Act 1993 to introduce administrative consequences for contraventions relating to self-managed superannuation funds.

The government's Super System Review found that the Commissioner of Taxation, as regulator of self-managed superannuation funds, needs to have effective flexible and proportionate powers to address non-compliance with superannuation laws.

Currently, the commissioner has a limited number of tools available to address instances of non-compliance. The review acknowledged the benefits that the current penalty regime provides in dealing with and deterring non-compliance; however, it did highlight some areas of the current regime which limit the commissioner's ability to achieve optimal regulation.

Applying the current penalties can be costly and time consuming and the potential consequences can be disproportionately high. The absence of graduated penalties results in a number of self-managed superannuation fund trustees avoiding sanction for contravening conduct by simply rectifying the conduct when it is detected. This may be appropriate in certain circumstances, but it is not appropriate that trustees can continue to contravene the law and for their actions to have no consequences.

The review recommended that the commissioner be given additional tools, both educational and punitive, in conjunction with his existing powers. These tools will support the ongoing integrity of the superannuation system.

The measure delivers another Stronger Super reform for self-managed superannuation funds.

The government is delivering reforms that improve our superannuation. I commend the bill to the House.

Debate adjourned.