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Tuesday, 7 December 2004
Page: 89

Senator CHERRY (5:46 PM) —The Tax Laws Amendment (Superannuation Reporting) Bill 2004 is in some respects a surprise. It removes an election promise the government made in 2001 and replaces it with what is clearly a very opportunistic election promise they made before the last election. It is a surprise because the legislation to actually introduce quarterly reporting on superannuation and quarterly reporting in respect of employer contributions back to employees was only debated in this place two years ago. In fact it is a pity that Senator Coonan, the then Assistant Treasurer, is not in the chamber today because I want to read back into the Hansard what she said when introducing this reporting requirement on 27 June 2002. She said:

The new regime will provide much more certainty to employees. More frequent contributions will create higher superannuation benefits because of compounding interest, a lower risk of workers losing superannuation entitlements if a company falls over and more timely evidence of noncompliance making it easier for the ATO to detect those employers who are failing to pay, and will lower the risk that a member's death and disability insurance where it is provided by a super fund might lapse between annual contributions. Furthermore, the bills require employers to report to their employees the amount and destination of their SG contributions. This will encourage employees to take an interest in their superannuation and alert them to any noncompliance sooner.

It is also worth noting that, as I said, this was actually part of the government's 2001 superannuation election policy. I want to quote now from the Prime Minister's press release of 5 November 2001 announcing his A Better Superannuation System policy. He said:

In order to ensure fairness between employees and to encourage employers to make regular superannuation contributions, the Coalition will require all employers to make at least quarterly superannuation contributions on behalf of their employees.

All of this makes it quite clear that the government recognised not only that superannuation should be paid to employees quarterly but also that employees needed to know that they were receiving it. Really that is a fundamental part of education. In fact when the government announced this backflip back in July 2004, when they decided to remove the requirement to report to employees, they were panned by not only the unions—the usual suspects—but also pretty much the entire superannuation industry and large chunks of the press. It is not often I find a Financial Review editorial criticising the government, but after this particular announcement was made the Financial Review went to press. On the one hand it was very positive about the government's superannuation agenda, such as the government's co-contributions scheme, which was increased in June last year and cut the surcharge, and the introduction of choice of funds legislation. On the other hand, the Financial Revieweditorial of 9 July this year said:

The super week has been soured by political opportunism. Prime Minister John Howard abruptly announced a reversal of the rule that employers have to notify fund members each quarter that their contributions have been paid into their super fund ... Every employer has to pay the amounts each quarter anyway, so the burden consists mainly of having to write to employees. Small employers do struggle in industries with a lot of itinerant employees, but why not tackle these problems with a suitable “best endeavours” clause?

Instead, we have seen the minister in charge of superannuation, Helen Coonan, who talks endlessly about safety in super and reducing the amount of “lost” super, praising this overreaction. Even though it will take away the most basic protection—that members know contributions are actually paid—the minister believes “a combination of practices and safeguards found throughout other ... legislation will allow employers and employees to remain informed about superannuation”.

How does the government expect fund members to take greater interest in their super, track their money or choose the right fund if they're told about their account balance only once a year?

That is a pretty good summary of the issues tied up with this legislation. I think it is a real pity that we see this legislation coming forward from the government at this particular point in time. The actual explanatory memorandum attached to this bill is, in my view, misleading about the impact of this bill. It says quite clearly in the regulation impact statement:

The provision of information to employees will be maintained by a combination of reporting provisions in other Australian workplace legislation that requires reporting on payslips, and annual reporting from superannuation funds.

The ACTU, in their submission to the Senate committee looking into this bill, said the problem is that employees not covered by an award or whose award or agreement does not provide for superannuation contributions to be made do not have an entitlement to information about superannuation contributions. There is a real problem that the industrial relations system does not provide the information that the explanatory memorandum says it does. In addition, the ACTU points out:

It is not correct that state legislation necessarily provides for superannuation information to be supplied in payslips. In New South Wales, South Australia and Queensland, payslips are required to contain information about contributions but not the funds to which they are paid.

So we see that what the explanatory memorandum is saying about this bill is not in fact what it does. The simple fact is that a large number of employees will now again no longer have much clue as to where their superannuation is going. This makes it much more difficult for choice of funds to operate effectively and for the education of employees to actually be effective. I want to also quote the contribution from the Association of Superannuation Funds of Australia to the Senate committee because I think it made a very important point. It said:

The superannuation industry saw the reporting obligation as particularly useful in tackling the problem of lost superannuation accounts as it will help employees keep track of their contributions. At an even more basic level, contributions reporting is a form of employee education as it is quite likely that an employee will take more notice of information about what the employer is paying to a fund on their behalf when it is associated with current entitlements to salary and wages. It is perhaps more difficult for fund communications to claim this level of attention.

So you can see that the superannuation industry, the unions and, indeed, the financial press recognise that reporting back to employees was a fundamental part of developing security and certainty in superannuation and reducing that huge body of $7 billion in lost accounts in this country. We in the Democrats recognise that you need to reduce compliance costs to business, and I think that is appropriate. You do not want to impose a compliance cost on business unless it is absolutely necessary, and whenever you do you seek to minimise that compliance cost as much as possible.

The advice from the Australian Financial Review's editorial was that we seek to ensure that best-endeavours reporting is picked up. The advice from ASFA is that we at least expand out the reporting on payslips to make sure that that picks up reporting back to employees. Indeed, if we are going to take the actual assertion in the explanatory memorandum that payslips is where all this stuff is reported, why don't we actually say that if they report it in payslips they do not have to report? That would actually pick up a large chunk of the compliance problem and reduce it significantly whilst actually confining the compliance issue to that very small number of employees not covered by awards and not covered by agreements which include superannuation clauses that provide for reasonable reporting back to their employees. That would actually significantly reduce the compliance cost burden and ensure that we were making a contribution to reducing the incidence of lost accounts and reducing the incidence of people not knowing where their superannuation is going.

That is why in the committee stage the Democrats will be moving an amendment, which I have just circulated, to actually broaden the reporting requirement in this particular bill to cover this and to recognise that a reporting requirement is met where the information is provided on payslips or in a form that the employee can reasonably understand, such as a letter. For the vast majority of employers who already provide this information through payslips, that would mean that the actual compliance cost would not be there, and hopefully it would encourage employers to put this information in payslips, which would be the best place for it to be provided. It would at least ensure that there is reporting back to employees so that they can in fact track their superannuation.

This is a very disappointing bill. When this legislation was introduced two years ago, it had unanimous support in the Senate. We had all been calling for a long time for quarterly reporting. We had all been calling for a very long time—I have been involved in superannuation debates going back to 1993—for efforts to actually reduce the incidence of lost accounts. This legislation to introduce quarterly reporting as well as quarterly payments was actually a very positive step towards reducing the incidence of lost accounts. It is a pity that, as part of a small business compliance measure, the importance of that has been lost. It is a pity that we are going to actually see less, rather than more, reporting and that we are going to actually let business off the hook over developing decent and reasonable reporting back to their employees.

As I said, we have a whole bunch of ideas on how to actually reduce the compliance cost. Recognition through payslips is one idea, and that is the subject of the amendment that I will move today. It could also be done through the tax system, to augment the tax reporting which employers are already required to do. It could be done in other ways to actually ensure that the report does get back to employees in a way that minimises the cost to employers. That debate has not been opened. As the AustralianFinancialReview editorial said, this is very much about an opportunist statement—a bit of a big bang announcement following up on the Prime Minister's small business compliance announcement back in July last year.

I am pleased that Senator Coonan has joined the debate in the chamber. It is certainly disappointing to see this legislation coming forward. The Democrats will be opposing this legislation. That does not mean we are not open to discussing how to reduce the compliance costs of superannuation reporting; we are very open on that issue. But let us have a debate about how we actually balance, on one side, the importance of compliance costs and, on the other side, ensuring the employees get the information they need to actually protect their superannuation and make it safe and secure. Let us not engage in these opportunistic, simplistic solutions which may benefit certain categories of small business but will actually reduce the certainty and security facing employees in this country in terms of their superannuation. Particularly with the choice of funds legislation coming, it is absolutely crucial that we ensure that employees have more information to make informed decisions about their superannuation rather than less.

I will ask the minister to address, in her second reading debate comments, what the government intends to do to overcome the very large hole that is now going to appear in superannuation reporting and to ensure that, when the choice of funds legislation comes in, employees do not lose the information they are receiving through quarterly reports. How are employees going to be informed of what they have actually received, given that the assertions in the explanatory memorandum are not correct about the role of the award system and the role of state legislation? How are you going to ensure that employers are encouraged to continue to provide this information so that employees can in fact follow their superannuation and make reasonable and informed choices, and so you actually reduce the incidence of lost accounts?