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Monday, 7 May 1984
Page: 1637

Senator GRIMES (Minister for Social Security)(3.33) —Senator Messner referred to the fact that I have been overseas. I admit that that is so. I have just returned and am a bit jetlagged. I tell the Senate, however that Senator Messner has, in fact, been overseas longer than I. He has been to Thredbo for the weekend. We have just heard an extraordinary speech which in the end seemed to reach some sort of strange anatomical level. Senator Messner was talking about people being stabbed from the back and the front, having no stomach, and not being willing to chance their arms. He referred to Brutus and God knows who else in his speech. I suggest that what Senator Messner has demonstrated-whether it is due to jet lag, overseas trips or what-is that any confusion in this area is, in fact, in the minds of Senator Messner and his colleagues and is not in the Government or the electorate.

As I said, Senator Messner made great point of the fact that I had been overeas and said that he hoped I would get up and give some answers to the sorts of problems that he raised. I remind him again that he also has been overseas and was overseas longer than I. He made no reference to his trip because, I dare say , he found that people overseas are also experiencing problems concerning how they should deal with the question of retirement income in their communities. One thing I noticed when I was overseas-I talked to various people at all levels of government and bureaucracy who are dealing with retirement income-was that people view with amazement and wonder the situation which exists in this country whereby we have a superannuation system which provides for tax deductions for superannuation contributions, which provides for tax exemptions for the companies which provide those contributions and which then provides for taxation on only 5 per cent of a lump sum which is paid at the end. They view that with great wonder.

Senator Messner —Did you talk to the people in the United Kingdom?

Senator GRIMES —Of course I talked to the people in the United Kingdom. Senator Messner knows what the people in the United Kingdom think. I suggest that the problem faced by the people in the United Kingdom is the same as the problem we face. The problem that the conservative Minister in the United Kingdom faces at the moment is a rough equivalent to what Senator Messner and I are talking about ; that is, the very large-sometimes #40,000 or more-severance payments which are made to some people in that country are also, as they are in this country, able to be converted so that they are not considered as income. Those people then receive full pensions, full fringe benefits and the full rate reductions that other people receive in England. My conservative equivalent in England is trying to do something about that. The aim of this Government is not, as Senator Messner suggested, to wipe out occupational superannuation. It is not to wipe out people's capacity to contribute during their working life to their retirement. It is to provide for the existence of superannuation schemes which do what superannuation schemes are supposed to do and which they do in every other country; that is, provide a weekly income on retirement to people.

The aim of the taxation deductions for superannuation payments and the aim of the special treatment, as far as taxation is concerned, of firms which provide occupational superannuation has been and is always stated to be, as Senator Messner will see if he looks at the debates in the past, to encourage people to enter into private superannuation payments so that when they retire they will not be a burden on the age pension system and on the welfare bill in this community. Quite clearly, what has been happening with many of these people, as is well known to Senator Messner and to those involved and those knowledgeable in the area, is that people have been able to take advantage of our system because of lump sum payments and because of the concessional treatment of lump sum payments. They are not only able to receive the full benefits of those superannuation schemes, of those tax deductions and the non-taxation of firms, but are also able then to receive full pensions and full fringe benefits. That is the problem. Senator Messner knows it is the problem. That is what it is all about.

Senator Messner —So it is all about double dipping?

Senator GRIMES —It is not all about that. It is about providing a fair and equitable system. Senator Messner knows it. Let us say that we have two people who are neighbours. One is in, say, a Public Service superannuation scheme and receives his or her benefit as weekly payments and therefore loses fringe benefits and part or all of his or her pension. Let us say that next door is a person who has contributed the same amount in superannuation and received the same taxation benefits but who receives a lump sum payment and is able to be taxed on only five per cent of it and then, through some device-those devices have blossomed in this community since the assets test was removed-is able to receive, as well as the benefits of that lump sum payment, the full pension and fringe benefits. There is no way that that system is fair.

There are two ways out of it. The first is to provide everyone with a full pension and full fringe benefits. The second is to overcome the situation by encouraging superannuation schemes through lump sum taxation or however else to provide weekly superannuation payments. If we go down the first track, which is the inevitable result of the sorts of policies that Senator Messner and the Opposition have talked about and provide everyone with full fringe benefits and full pensions, we can do it in only two ways. The first way is by increasing taxation, because the pensions of today are paid for by the taxpayer of today, and I do not hear anyone from the other side ever advocating that. The second way leads to what inevitably happens in a system such as ours when we try to provide pensions to everyone regardless of need. Those pensions are at inadequate levels, particularly for the low income people who need them most.

I welcome a debate on retirement policy in this country. We should have more such debates. But I do not welcome the sort of debate that we always seem to have on the few occasions when this matter arises. What the present Government decided to do was, first, as has been recommended by many people, including all the national superannuation inquiries, to encourage the development of private superannuation schemes which paid people a weekly income on retirement. One way to do that is to provide for more equitable taxation on lump sums unless people turn those sums into annuitites or other forms of weekly income payments. Another way to do it, as Senator Messner has pointed out, would be to increase the taxation on receipt of those funds. But Senator Messner is opposed to that.

The members of the Opposition are opposed to every suggestion which has been made to make our retirement system fairer. They are opposed to changing the system of taxation on lump sum superannuation. They are opposed to increasing the taxation on the superannuation funds at the point of those funds being paid in. They are opposed to tackling the system in any other way, as I understand it , through, say, capital gains taxes, wealth taxes or any of the methods that are used.

Senator Messner —Are you bringing in a capital gains tax?

Senator GRIMES —No, I am just saying that the Opposition members are opposed to those sorts of methods, which are used in every country which I suggest that Senator Messner visited.

Senator Walters —He has been proposing such a tax for ages.

Senator GRIMES —If members of the Opposition, including Senator Walters and Senator Messner, are opposed to all those things, and opposed to the very generous means test which has been introduced on the over-70s pension, which is only an extension of the means test that they introduced-by that stage one is getting to over $1,000m-it is about time that they said what they are in favour of. After all, they have been in government for seven years, and before that they were in government for 23 years. For all that time they administered the pension scheme. For the period of the 23 years before 1976, they administered an assets test. Minister after Minister, including Mr Sinclair and others who are still in this Parliament, administered an assets test. Even Senator Dame Margaret Guilfoyle for a short time administered the assets test. It was administered, and then, suddenly out of the blue, for reasons which have been admitted by Senator Withers, the assets test was removed because of pressure and problems from the Country Party.

When the assets test was removed, the justification given in this place was that Professor Henderson and the Commission of Inquiry into Poverty had recommended it. But Professor Henderson said that although the removal of the assets test would simplify the application of the means test, it would not be fair and would create all sorts of anomalies unless some method was introduced to stop people abusing that absence of an assets test. He recommended the introduction of a capital gains test at that time. When that assets test was removed, we saw, as I have said, a great blossoming of schemes which were invented by some of the inventive companies in this county to enable people to avoid the income test, to receive the full benefits of their lump sum superannuation payment or whatever assets they had and still to receive full pensions and full fringe benefits, to the detriment of those on low incomes or those with no incomes, who, as a result of that, have seen the real value of their pensions drop from 24.4 per cent of average weekly earnings in 1975, when the previous Liberal Government came to power, to 22.2 per cent later.

The simple fact of the matter is that no conservative or Labor government in this country can perpetuate a system like that. They particularly cannot perpetuate that system, as Mr Daryl Dixon says in the paper he gave to the Committee that Senator Messner was partly instrumental in establishing, if we are to have an aging population as we are going to have in our community as in other Western communities. I do not over-estimate the problems we will face from that aging population in the way some people do. In fact, it will not hit this community as much as it will hit other communities. But it certainly will be a factor, and we cannot persist in providing inadequate pensions and services to those who need them most while those who have the capacity to do so, through our imperfect existing system can get the full benefits of the system when they quite patently do not need them.

It is for that reason that the Government announced that it would introduce an assets test; it was for that reason that the Government wishes to amend the superannuation legislation; and it is for that reason that the Government introduced the income test on the over-70s and an income test which is far more generous than that which is provided for people aged 65 to 69. Senator Messner says that great political difficulties have arisen out of this; people do not like it. Of course, some people in the community do not like it because they are advantaged by the imperfections of the existing system over their brothers and sisters. Of course people do not like it if they can receive the sort of lump sum payments or have the sort of asset levels that Senator Gietzelt pointed out some people have, and yet still get the full benefit of our pensions and our health services, et cetera, without contributing to them. I accept that those who do well out of the existing system will always resist change of that type. Of course the airline pilots, who were working 36 hours a month, and who in some cases received lump payments of $500,000 opposed it to the extent of going on strike. Imagine what would have happened if another group in the community had gone on strike over an issue like that. The howls from Opposition members would have been loud and long.

Of course they oppose it, but still they will not be affected retrospectively. They will still be able to convert either their superannuation entitlements or their lump sums into annuities and not have to put up with that tax. What they will not be able to do is what they should not be able to do-that is, to convert that lump sum into property trusts or whatever and take the full pension and the fringe benefits that go with it. That is what they will not be able to do and that is how the system will become fair. The sort of changes we are continuing to advocate are not the whole answer to the problem.

Senator Walters —You have two bob each way.

Senator GRIMES —Senator Walters is the one who has two bob each way. If anyone has created distress and confusion amongst a small group of people in this community, it is Senator Walters, by the letters she has written to the paper and by the advice she and her office have quite wrongly and incorrectly given to people who have rung her. I think that her behaviour on this issue is absolutely outrageous. The advice she gave to people that they could not sell anything or that they could not spend their money otherwise the Government would penalise them when they retired was outrageous advice. She ought to be ashamed of herself for giving it.

Senator Walters —I have never ever given that advice.

Senator GRIMES —She did so, and more than one of her constituents has informed me of that. That was outrageous advice, and I dare say that we will have the usual personal explanation from Senator Walters.

Senator Walters —You bet you will.

Senator GRIMES —Of course we will. That explanation, as usual, will demonstrate the confusion she has caused. She has written letters to newspapers, outrageous letters talking about pensioners who sold their assets because they were confused by what I said or what this Government said when it turned out that they were confused by what she and her office had said. It is one of the most disgraceful things to have happened in this Parliament in recent times.

I believe that, quite simply, we need the development of a system which is fair and which does what the existing system is supposed to do, that is, to provide the people of this country with an adequate retirement income by a fair distribution of the funds available to governments in this country to people who have retired so that an unfair burden is not placed on the existing taxpayer and so as not to cause unfair discrimination amongst those relying on the retirement income. What Senator Messner says about the existing dual system, which provides for encouragement by tax incentives and for an underpinning of that by the provision of pensions, quite clearly is not so. The examples given in this place and in the newspapers of this country of people who have taken those generous tax concessions, who have provided themselves with very large capital and asset holdings and who at the same time, on retirement have been able to take advantage of a full pension and full fringe benefits, quite simply cannot continue.

If we have some adequate explanations from the Opposition of how we can overcome the inequities in the existing system and can produce an affordable system which distributes funds on the basis of need to those people who have retired, I will listen to it, but we have not heard that today or in the last 12 months, and I dare say that we will not hear it in the future. At the moment the Opposition is engaging in party political rhetoric in an endeavour to do what Senator Messner accuses the Government of doing, that is, to frighten people to make them resist change for the sake of resisting change. We will not be moved by that sort of rhetoric or political tactic. We will move towards a fair and decent system in this community to provide adequate retirement incomes for all.