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Thursday, 31 October 1996
Page: 4901

Senator WATSON —My question is directed to my colleague Senator Kemp, the Assistant Treasurer. I refer to a number of reports in the press recently which have commented on the government's proposed mechanism for administering the high income earners surcharge on superannuation contributions. I ask: can the minister explain why the government is proceeding with its announced policy on the high income earners surcharge?

Senator KEMP —I thank Senator Watson for this question. He has a longstanding interest in this area, and I certainly welcome the question from him and the interest that he is showing.

The major initiative by the government is about correcting the inequity of the Labor model. The high income earner contribution surcharge will make the superannuation system more equitable for all Australians while ensuring that superannuation remains an attractive savings option. I welcome Senator Conroy's announcement in the press today—thank you, Senator—when he said categorically that Labor supports the high income surcharge initiative.

He could not imagine the party changing its position. I thank Senator Conroy for that endorsement. He also went on to say in his remarks—and I think I am quoting him correctly—that the ALP was not exactly innocent itself, making many changes while in office from 1983 to 1996.

Senator Conroy —Not actually what I said.

Senator KEMP —I think you were quoted as saying that in the press this morning. We welcome the analysis that he is showing. I went to some lengths in my speech to the ASFA national conference to address the surcharge issue and in particular to explain why the government would not change its broad approach to the collection announced in the budget. For the information of honourable senators, a key reason for this decision is that the alternative approach favoured by the superannuation industry would represent a substantial increase in the compliance costs of small business. Unlike Labor, this government has a commitment to reduce compliance costs to small business .

Senator Sherry —What about your commitment not to introduce new taxes?

Senator KEMP —Senator Sherry has just called out. I do not know whether he took the model he proposed through caucus or got the approval of Mr Beazley. But I wonder whether you explained to him when you decided to put that option forward that this would involve very heavy compliance costs for small business in this country.

The government has always acknowledged that the implementation of the surcharge will involve costs and there has been no debate on that issue. We have consulted widely to ensure the lowest cost option would be implemented. We believe that these costs are minor compared with the benefits which flow from a fairer and more equitable superannuation system. The government believes the overall community compliance cost of reporting will be higher under the alternatives which transfer reporting obligations to employers.

There is nothing simple or cost effective about the alternative proposals which have been favoured by the superannuation funds. The preferred fund option would lead to yet further imposts on employers and small business. As noted in my speech, employers will be required to modify their current payroll systems. Many people in small business would be required to replace off the shelf payroll software packages and, of course, the 1996-97 group certificates which have already been distributed to employers would need to be replaced.

Even under this alternative approach, superannuation funds would still be involved in the surcharge process. What the government is doing is engaging in extensive consultation to ensure the announced mechanism is introduced in as efficient, as equitable and as cost effective manner as possible. A joint ATO-ISC industry implementation advisory group has been established for this purpose.

Senator WATSON —Madam President, I ask a supplementary question. I thank the minister for his response, for his concerns about high compliance costs, and I ask: can the minister further comment on the attitude of sections of the superannuation industry to the government's proposed mechanism for collecting the surcharge?

Senator KEMP —As I have announced, the government is committed to the approach which was outlined in my speech to ASFA and sections of the industry should now accept this reality and focus on how to implement this approach in as cost effective manner as possible. Susan Ryan, who is well known to this parliament, has said on a number of occasions that she accepts the right of governments to govern. I look forward to ASFA making a positive contribution to the implementation of the option which we have now announced.

As part of these consultations, to ensure that the collection mechanism is introduced in the most cost effective manner possible, I will be meeting with Susan Ryan and other representatives of ASFA this afternoon. We will be discussing matters associated with the government's announced collection method. While there will be some costs associated with the introduction of the surcharge, there are also potential benefits for superannuation funds. (Time expired)