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Thursday, 26 September 2002
Page: 5029

Senator WATSON (4:49 PM) —Senator Sherry's motion on superannuation alleges a series of failures by the coalition, but in reality it highlights the Labor Party's own ineptitude at developing a coherent superannuation policy or series of superannuation policies. Recall the last election: there was no ALP superannuation policy. They have still not rectified the matter, although they continue to nitpick at the edges—and that is what this motion is doing today.

Regrettably, as I said, the Labor Party has chosen to politic on superannuation—an approach that is despised right across the nation, irrespective of people's party beliefs. What Australians want is a bipartisan approach to superannuation, and the Labor Party has failed to deliver. Superannuation is for the long term, requiring stable long-term policies. The coalition has delivered. What the motion before the chamber does not tell the Senate is the remarkable achievements that this government has delivered in terms of retirement incomes—for example, allowing working individuals who are aged 70 but less than 75 to make contributions to superannuation. That, in a sense, has removed some of the age discrimination that was there previously. This follows from the government's earlier initiative that increased the age limit from 65 to 70 for voluntary contributions and for employer contributions.

Other initiatives include allowing for recipients of the baby bonus to contribute to superannuation even though they have never worked before and for parents, relatives and friends to make superannuation contributions up to $3,000 per child over a three-year period. From July 2002, the attractiveness of superannuation was enhanced by the government's initiative to increase the limit on full deductibility of superannuation contributions by the self-employed from $3,000 to $5,000 per annum, while retaining 75 per cent deductibility on any amounts above this threshold, subject, of course, to the age based limitations. Another initiative already implemented by the government includes requiring all employers to make at least quarterly superannuation contributions on behalf of their employees—a great enhancement and, I must say, one that was recommended by our superannuation committee.

Amendments to the Family Law Act allow superannuation benefits to be split between married couples that separate—a great initiative. There is the introduction of the superannuation spouse rebate, which allows individuals to make superannuation contributions on behalf of their low-income spouses. There are also the capital gains tax reforms that amend the tax arrangements so that the nominal capital gains of superannuation funds are taxed at the concessional rate of 10 per cent.

There will be a twice annual indexation of Commonwealth civilian superannuation pensions to the CPI from January 2002, increasing in real terms the benefits of some 100,000 superannuation pensioners—a great reform. New investment rules ensure that superannuation savings are not a put at risk through investments with employers, trustees and their associates. Another initiative of this government is that there are now higher tax rebates for senior Australians. The Commonwealth has also increased access to the age pension and the Commonwealth seniors health card, and the pensioner bonus scheme entitles Australians who defer claiming the age pension and instead remain in the work force to a tax-free lump sum bonus—a great initiative.

I need to remind the Senate that the tax concessions provided to superannuation make it the largest single tax expenditure item, amounting to $9.5 billion in 2001-02— and wouldn't Senator Patterson like some of that concession in health? For the first time in many years, the Senate is faced with the opportunity to reduce certain superannuation taxes and the Labor Party has failed at the first hurdle, at the first challenge—that of supporting a small reduction in that notorious surcharge. Having spent so much time railing right across Australia about all the inherent problems associated with the surcharge, at the first opportunity the Senate has to ameliorate some of these problems the Labor Party has failed to stand up and be counted—so much for the ranting and railing!

Senator Sherry, the mover of this motion, knows only too well that it is not only the high-income earners who have to pay the surcharge but also many working women who are in the work force for only a short period of time with short periods of high income, as well as others with broken working patterns, who pay the surcharge in some years when attempting to catch up their contributions so that they can make a dignified living in retirement. The surcharge may also inappropriately impact on some of our older Australian workers who have superannuation within the RBLs and who are attempting to make additional contributions to fund their retirements. It is interesting to note that Superpartners, an administrator of some of Australia's largest industry superannuation funds, supports the government's reduction in the surcharge. I have to say that at the same time they are also seeking a reduction in, or abolition of, the contributions tax. But at least they are in favour of the measure before the parliament at the present time.

To remove the surcharge in one budget would be a massive exercise, and the approach of gradually reducing the surcharge over an acceptable term appears to most people to be sensible. I point out to the Senate that every measure that moves towards a reduction in the surcharge should be adopted by the Senate. I remind the Senate that the administration of the surcharge affects all members of a super fund, not only the high-income earners. The surcharge has some very unfortunate outcomes for defined benefit members. Do not forget that, at the present time, it is the defined benefit funds that are standing up; they do not have negative returns because the risk is with the employer not with the employee. The industry generally recognises that the equity measures that were behind the original concept of the surcharge—something that the government had to do to rein in that terrible deficit when it came into office—are better dealt with through existing limitations such as contribution limits, reasonable benefit limits and the low-income co-contribution, which has the same effect of very substantially lowering the contributions tax.

Let us look at these existing limitations, which can be used very effectively: under 35 years of age, the amount is $12,651; from 35-39, $35,138; and for people aged 50 and over, $87,141. So why do we need the surcharge? Let us get rid of it; let us use this first opportunity in this place to reduce it, so that we will set in train a pattern for its eventual abolition.

While the motion attempts to criticise the government on compensation for theft and fraud, I really need to remind the Senate that Senator Coonan has increased the proportion of the losses that would be paid in financial assistance under the previous ALP policy, which reigned until 1997, from 80 per cent of any losses under part 23 to 90 per cent of eligible losses. In addition, Senator Coonan is generously also moving quickly to finalise the determinations under section 229 and, in addition to recouping the 90 per cent, is adding other expenses such as administrators charges. One of the strong pillars of community acceptance of superannuation is section 229 of the Superannuation Industry (Supervision) Act. It is almost as good as the Reserve Bank standing behind the deposits of trading banks. Section 229 provides for the government to compensate where there is theft or fraud and, to Senator Coonan's credit, since she came to office she has implemented those provisions very expeditiously, and that has been very much appreciated. If the mover of this motion paid more attention to supporting all the outcomes of the Senate Select Committee on Superannuation, Australia would be far better off and so would the ALP.

I will give you an example of something that came about as a result of our work that I learnt of only today. The Reserve Bank of Australia have changed their superannuation arrangements to bring them into line with the recommendations in the committee's report, A `reasonable and secure' retirement? The benefit design of Commonwealth public sector and Defence Force unfunded superannuation schemes, of April 2001. It just shows what a bipartisan approach can produce. The RBA are now moving to a wage based indexation arrangement—what we recommended. So I say to the ALP, come aboard. Get behind us and see the sorts of impacts you can make when you have a unanimous report.

This week Australian Securities and Investments Commission Chairman, Dr David Knott, released a major report into fees. The report was commissioned by ASIC and prepared by Professor Alan Ramsay. I ask the Labor Party to pay particular note to a number of key recommendations, which include adopting an ongoing management charge, commonly referred to as an OMC, as a key measure across all consumer products, not just superannuation related products. The report also recommended a number of other things: disclosure in dollar terms, not percentage, to the maximum extent possible and disclosure of fees paid to advisers, including trailing commissions and soft commissions. This report must be a great embarrassment to the Australian Labor Party because it was the Australian Labor Party that so criticised the OMC that it was led to the conclusion that it had to knock off the government regulations—and what a tragedy that was! In other words, the ALP so criticised the ongoing management charge that it disallowed the regulations in the Senate. This independent report issued by ASIC and prepared by the respected Professor Ramsay, who, incidentally, also gave the government the report on the independence of auditors—a very good report too—has shown how out of touch the Labor Party is in the Senate in relation to superannuation and, more especially, the ongoing management charge.

It is interesting to observe that the Labor Party is now calling for a cut in contributions tax for all Australians. I remind the Senate that it was the Labor Party itself that introduced the concept of a contributions tax—a tax that effectively reduces the potential capital of an employee through the superannuation guarantee charge. For example, a $100 contribution is reduced to $85 for actual investment. This tax over a lifetime of compounding and continued investment would have significantly reduced people's standards of living in retirement, but it was cut back. It was not until the superannuation funds started reporting some negative returns in about 2002 that the focus really moved to the impact of fees and charges et cetera. This in itself is not surprising, but it was ignored by the Labor Party of the day—all of these arguments were ignored—when it decided to bring forward the collection tax through this concept of a contributions tax. Now the Labor Party says, `We got it wrong.' But it brought forward the contributions tax to pay for its extravagant spending during its last days of office when it rang up huge budget deficits and borrowed so massively in terms of the federal debt, which we have now reduced by something like 60 per cent. It was the government that had to rein in this excessive expenditure which the Labor Party often financed by imposing new taxes and increasing debt.

We now have the situation that the Labor Party motion before the Senate absolutely fails. It fails because it does not demonstrate a commitment to bipartisanship. The Labor Party must get on board if it is going to have credibility in the general population for providing a bipartisan approach to superannuation for the long term. As I said previously, people rant and rail at this concept of nitpicking. They want stability for their savings; they want security for their savings. And what is the Labor Party doing? This motion does nothing to provide confidence in superannuation for people. It is an appalling motion. It is a motion the Labor Party should be very ashamed of putting forward in this environment, particularly as it has no alternative policy. It is time the Labor Party woke up to itself. It is time the Labor Party recognised the achievements of the coalition in the massive improvements that the coalition have made. While we continue to provide reform, while we continue to provide progress and while we continue to provide hope, I believe the Australian electorate will stand behind this coalition government. In the coalition we have nothing to be ashamed of. I thank the Senate.