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Monday, 18 November 2002
Page: 6570

Senator WONG (1:22 PM) —It is interesting that in their public announcements and here in the Senate the government have referred to the Superannuation (Government Co-contribution for Low Income Earners) Bill 2002 and the Superannuation Legislation Amendment Bill 2002 as a balanced package. The proposals set out in the two bills before the Senate, which deal with co-contribution and/or a cut to the surcharge on superannuation contributions, are anything but a balanced package. They are unfair and skewed towards benefiting higher income earners at the expense of low- and middle-income Australians. It seems extraordinary that the government can come into this place and continue to argue that this is a balanced package when they are in effect providing a tax cut to Australians who earn significantly high incomes, certainly higher incomes than many of the electors who put us in this place.

As previous speakers have said, there are two bills before the Senate. The first deals with co-contribution. Contrary to the lecturing of Senator Watson, we are supporting this legislation, as Senator Sherry has indicated on behalf of the Labor Party. It has also been said that we think it is a somewhat poor imitation of the 1995 Labor Party proposals to extend co-contribution arrangements to benefit low-income earners. Nevertheless, despite its failings, we are supporting that measure. It is incorrect for Senator Watson and others in this chamber to suggest that the Labor Party are not supporting low-income earners in relation to these superannuation measures; we are.

I will indicate that there are some issues that should be put on the record in relation to the proposed co-contribution—that is, that it does not extend as far as it ought to. Evidence presented to the Senate Select Committee on Superannuation by ASFA, the Association of Superannuation Funds of Australia, estimated that the number of people who would receive the full $1,000 in co-contribution is only 75,000. This estimate is based on ATO evidence of a total pool of 4.4 million Australians with incomes of less than $32,500. If this measure is only going to fully benefit around 75,000 people out of 4.4 million Australians, one has to question to what extent it is actually of significant benefit. Nevertheless, despite its failings, we are supporting that aspect of the two bills before the Senate, as Senator Sherry has indicated.

What we are not supporting is the tax cut for wealthy Australians. This is, of course, the reduction in the superannuation surcharge, a tax which was put in place by the government. Despite having promised in 1996 that they were not going to introduce any new taxes, the government imposed this tax on superannuation contributions. The reduction in the superannuation surcharge is a tax cut for those who earn over $90,500 per year and provides the highest benefit to those earning over $109,900 per year. Are these really the Australians whom the government ought to be advantaging in terms of cuts to tax—in an environment where we are constantly lectured about fiscal pressure by government ministers? However, the government are intent on proceeding with a tax cut for extremely wealthy Australians. It seems extraordinary that the government choose to link this tax cut with a measure that is good, albeit insufficient, for low-income earners in an attempt to provide political cover and that they consistently continue to describe this as a balanced package. It is not a balanced package; it is a tax cut for wealthy Australians and provides some minimal benefit to low-income Australians.

For the reasons that have been set out by Senator Sherry, the Labor Party is opposing the reduction in the surcharge tax. There has been some discussion in the public about Labor's alternative proposals, which are far more equitable and would provide tax relief and superannuation contribution incentives for a far greater pool of Australians. Two options have been discussed. The first is a reduction in the superannuation contributions tax for all Australians, from the present level of 15 per cent to a level of 13 per cent. The second option involves cutting the contributions tax to 11.5 per cent for people aged 40 and over. Obviously, that category of people will be retiring in a shorter time than those under 40, and there are good public policy arguments in favour of enhancing the savings measures and incentives targeted to those Australians. In any event, both of the options that I have described would be far more equitable than the government's proposal, which unfairly benefits high-income earners, people earning over $100,000 per year, rather than low-income earners.

It is extraordinary that the government come to the Senate saying: `This is a balanced package. We're not going to tinker with it. If you want to pass the measures which are of benefit to low-income Australians, then you have to also pass a tax cut on to Australians earning over $109,000 a year.' That is not an appropriate approach for the government. There are good measures in the co-contributions legislation, and the Labor Party is supporting them. These measures are of benefit to people who are on lower incomes and deserve some sort of incentive and support to boost their retirement income. Superannuation is a significant source of wealth for many Australians, now and in the future. For many Australians it will be their largest asset, and it will be a significant source of retirement income in the years to come. The challenge for governments is to ensure that public policy actually benefits all Australians, not simply the wealthy. Unfortunately, the government appear to have failed that test.