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Tuesday, 2 June 1987
Page: 3829


Mr WILSON(9.45) —I want to take part in the debate on the Occupational Superannuation Standards Bill, the Insurance and Superannuation Commissioner Bill and the Insurance and Superannuation Commissioner (Consequential Provisions) Bill. There are two unfortunate things about this debate. First, the circumstances in which it occurs and, secondly, the inadequacies of the legislation now before the House. This debate occurs in circumstances where this country has been tormented by economic difficulties. Wage levels should be maintained at present levels so that we can become competitive with our international trading partners. Productivity levels do not justify a hidden wages increase.

Having said that, I believe that it is wrong to bring those issues into this debate. Ultimately, this nation must have a coherent superannuation scheme, but not necessarily a government run scheme. This country requires that everyone in the community is assured that on reaching retirement age he will have available to him a stream of income that provides an adequate minimum standard of living. Furthermore, we want a scheme that provides to those who choose to postpone expenditure from their working years to their retiring years reward for that effort and benefit in their retirement and not penalty as now applies under assets tests and cruel incomes tests. This debate has become somewhat muddy because there are those whose concern about our high wage levels dominates their minds, and they lose sight of the real issues upon which we should be focusing.

The second reason why I think that this legislation has come in in unfortunate circumstances is that it talks about superannuation, yet it fails adequately to define what is meant by superannuation. Payments into superannuation funds receive substantial tax benefits. When most people talk about superannuation they think of it in terms of their retirement. What is important in retirement is a consistent stream of income over the retirement years-whether they are long or short.

For many years I have advocated the major reform of our social security system. I believe that even today the most effective and efficient way to build national superannuation security for the whole of the nation is to provide a basic flat rate pension for all free of an assets test or an income test, and then allow people to provide above that level at whatever level they choose. If they want to save during their working lives so they can spend it in retirement, good luck to them. If they want to enjoy their earnings while they are working, they cannot expect to have it twice over at public sector taxpayer expense.

Some argue that the approach I take is very expensive-I do not believe that it is. I believe that the present income and assets tests heavily distort people's pre-retirement saving and investment patterns and heavily distort their early retirement expenditure patterns. As a result, many hundreds of thousands of Australians feel cheated on reaching retirement. They feel that they have paid their taxes only to pay other people's pension and on retirement, because of their frugalness and the sacrifices they have made during their working lives, they are denied.

The fairest way is to have a universal flat rate pension. I would go one step further and say that with such a flat rate pension, people must pay the present level of taxes. If a hidden wage increase is available because employers or employees are contributing to a superannuation fund-or if the self-employed want to contribute to a fund-people should be entitled to a tax deduction only if its value is invested in their superannuation funds and made available to them on retirement as a stream of income. If that does not happen, no tax deductibility should be available to them. That is one area in which the Bill is deficient, because it does not define superannuation as a stream of income in retirement. At the age of 55, people can take out the tax benefits available on contributions to superannuation funds, spend them all and then come back to the next generation of taxpayers and say: `I am poor, I have no income, you pay me a pension'.

High, middle and low income earners are, in increasing numbers, double dipping. While that happens, people will more and more expect the Government to provide the underpinning for their social security program. People should be able to opt out of paying tax provided that they opt out of receiving an age pension. For that reason, it is necessary that there be standards for superannuation funds, that retirement ages be set and that vesting provisions be laid down. As contributions to superannuation funds are part of the wages package, the vesting period should be very short indeed. The old-fashioned, paternalistic days where an employer could lock his employee into his employment have gone. Therefore, vesting should be short-12 months or even less. In some industries people move from employer to employer, to the benefit of all concerned. There should also be preservation until retirement, be it 65 or whatever age is set. It is now 65 for men and, perhaps, in these days of non-discrimination, it should be the same age for all. There should also be maximum opportunity for portability and, where that cannot be arranged, preservation within a number of funds should be guaranteed.

It may well be asked why there should be government intervention in superannuation funds. It is for two reasons only. Firstly, I wish to talk about why there should be public policy for superannuation and private provision for retirement. Governments have a responsibility to assure every Australian of an income in retirement. If, as I believe, the taxpayers are tired of paying taxes, they must be given room to provide for their own retirement. In effect, the Government should set up a compulsory regime under which everybody would be required either to pay taxes or to provide for retirement. As tax exemptions are given on the contributions to superannuation funds and on the income of those funds, those resources should fulfil their public sector government policy purpose, namely, the assurance of a stream of income to the contributors and members of funds on the attainment of the age of retirement. The tax provision should be equitable and fair to all and the tax benefit should not be greater for a contribution by an employer than it is for a contribution by an employee. The tax exemption for savings in a superannuation fund and for the income of that fund should be no greater than the tax exemption-which currently does not exist-available to a private individual who saves privately for retirement.

We must ask how, in those circumstances, we can assure that those funds are available as a stream of income in retirement. I do not believe that it is beyond the wit of this Parliament to devise ways and means whereby those who wish to save privately are required to give appropriate contingent security over assets-whether it be their homes or other investments-so that if they exhaust all other means of providing an income, there is an asset upon which the Government can call in lieu of the pension that it would then have to pay. We want neutrality in the tax system, but it does not exist today for individual private provision for retirement. Indeed, the present tax regime is not fair to the community because those on high incomes can obtain huge tax exemptions, where as those on low incomes obtain only low tax exemptions.

In today's Australia, the middle and low-income earners are so heavily taxed by the Government-as they were by past governments-that they cannot afford to save for their retirement. In any event, if they can afford it, they recognise that they will be punished and penalised by the high withdrawal mechanisms of the present income test, with the assets test now to overlay that. They think that it is not worth it. Yet those with higher incomes--


Mr Tim Fischer —Many suffering unemployment cannot afford it.


Mr WILSON —Many people cannot afford it because the taxes are so high and, indeed, because the penalty is so high when they do make the sacrifice. Many on higher incomes obtain huge tax benefits through the present deductibility of contributions by employers as well as by employees. Those who are penalised are the self-employed, the farmers and those who try to save privately. We need to examine our policy objectives, but this legislation fails to do that. We need to ensure that the taxpayers' role is to give encouragement to private provision for retirement in place of the public sector pension.

I began my remarks by saying that I believed in a universal flat rate pension, and I do. Under the present arrangements it is the most sensible, rational and fair way to proceed. Then, we can progressively relieve government of that expenditure by encouraging individuals, through tax relief, to replace a tax-funded social security pension with their own private provision, whether it be through superannuation funds or privately by the development of the new security arrangements that I have briefly outlined.

There is much that I would have liked to have said, but others wish to take part in the debate. I conclude by saying that until this country recognises that the cost of dependency will not go away while we continue to have the great expansion in expectation of life-nor would we wish it to do so-we must face the reality that an ever-declining proportion of our population will have to provide either directly or indirectly the resources for a stream of income to those in retirement. Even if we have private sector superannuation we will still find that the working population provides the retirees with the investment income that gives them their support.

We need to develop a rational and fair scheme, a scheme that allows Australians to co-operate together so that whether they are in the work force, out of work or in retirement, an adequate standard of living is available to all-a standard of living over which individuals have some degree of choice as to whether they spend now or later; a standard of living which gives people an incentive and, having given them an incentive, rewards them for postponing expenditure until retirement. This would have many side benefits. It would not merely provide relief to taxpayers when they reach retirement; it would provide substantial investment funds which would help to enable this country to trade into more prosperous times.