TAXATION LAWS AMENDMENT (SUPERANNUATION) BILL (NO. 2) 2002Cognate bill:SUPERANNUATION GUARANTEE CHARGE AMENDMENT BILL 2002
Mr CADMAN (Mitchell) (12.57 p.m.) —I rise to speak on the Taxation Laws Amendment (Superannuation) Bill (No. 2) 2002. I am amazed at what the Australian Labor Party is doing to this budget.
Despite commitments made by an incoming government at an election and movement towards the fulfilment of those promises, at the very first opportunity—at the first budget, which will fulfil promises of which superannuation is very much a part; all of the measures we are debating today were part of promises made during the election campaign—the opposition says that it will use its numbers to destroy the government's promises for which the Australian people voted and destroy, in the process, the balance of the budget. That is absolutely irresponsible.
Surely the members of the Australian Labor Party do not fully understand where that may lead in the future. Surely they understand that this exposes the whole management of financial affairs to a prospect that we have never considered in Australia before. It takes us into the realm of the American budget, with the President drafting a budget, often uncertain of what has transpired with his previous budget. If the Australian Labor Party pursues this line, I predict that it will expose the whole financial management of future Labor treasurers—if the Labor Party is ever elected to government—to the same sort of activity that the Labor Party is imposing on the House and the Australian people now. It means that no elector will know for sure, when they are asked to vote for promises or commitments, what will actually pass through the houses. It will mean that the Australian public will never be able to make a firm judgment about the future of financial management in Australia. I think it is a most dangerous and stupid thing that the Australian Labor Party is doing. What it is doing is inviting—unleashing, in fact—retribution on itself. I cannot predict what it will be like. It will mean that any financial measure, any budget, is now subject to any whim that the Senate wants to take up.
The shadow Treasurer stood here and made comments about superannuation, saying, `I disagree with it. Why don't you adopt the Australian Labor Party's policy?' The Australian people did not vote for that. They voted for these policies because they are a balanced approach to the whole process of superannuation. If you go through them one by one, there is something for people of low incomes, people of moderate incomes, families and high income earners. It is a balanced approach to superannuation.
Superannuation is difficult to understand and it is complex. The legislation does need to be straightened out. The government is in the process of an inquiry, and has made a commitment to attend to that over a three-year period. That is what Australians voted for. The specifics in this legislation are election commitments that have been brought forward in the budget. Now the Australian Labor Party says that in the Senate it reserves the right to destroy the budget and those commitments. I think the party will come to rue the day that such a decision was ever taken, because what it will do is to bring down on them the criticisms that they justly deserve. It will also bring about the rejection by the Australian people of that type of political management. The Australian people want to be able to trust their governments to deliver. This is a sad lack of acceptance that an election was lost by the Australian Labor Party. The bitterness in that loss is translated here into the destruction of the budget and the commitments made by the coalition prior to the election.
What does this legislation seek to do? It requires employers to make a quarterly superannuation contribution on behalf of their employees, instead of a yearly one. That is sensible, straight ahead, something for the workers to make sure that their super is always topped up in a continuing process. It helps safeguard against some of the problems that we have identified in the past, where employers have failed to make a contribution—whether or not it is the super guarantee levy—in a timely fashion, then the company has taken a dive and the employees have gone without their super. This legislation will safeguard, to some degree, against such a dreadful, unprincipled practice.
The legislation reduces the superannuation surcharge by one-tenth of the current level in each of three years, from 15 per cent to 10½ per cent over a three-year period. It allows superannuation contributions to be made on behalf of children who would not otherwise have superannuation. It increases the deduction limit for personal superannuation contributions made by self-employed people, and it increases from 70 to 75 years the age at which working members of superannuation funds can make personal superannuation contributions. All of these measures seek to cover a range of people in the community who deserve to receive benefit, every one of them. Let me deal with the measures one at a time.
The first is the quarterly contributions. Under the new regime, the super guarantee shortfall will be determined on a quarterly basis—simple, straight ahead. The current law does not provide for that. The new process is one whereby a penalty will be imposed, calculated at 10 per cent per annum of the charge, on employers not complying with this measure. This is a good and simple change, and should go ahead without interruption or inhibition. [start page 2818]
The next measure is the reduction of superannuation surcharge by one-tenth of the current level over a three-year period. This is justified. If there is any one thing that really prevents people in management from seeking to go ahead and do better, and to prepare for their retirement, it is the super surcharge. Because of the impact of the surcharge they look for all sorts of investment other than superannuation. There are a number of examples where the golden handshake has worked to the disadvantage of a highly skilled employee who should be investing these funds and using them up over a period as a superannuation payout. I have no doubt in my mind that this change is well warranted. If we are going to reduce everybody's capacity to earn to the same level, which seems to be the argument from the Australian Labor Party, there is no incentive for anybody to aspire to go ahead or to improve, or to create greater skills or more employment or innovation. Superannuation is very much part of that.
The third measure, allowing the super contribution to be made on behalf of children who would not otherwise have superannuation, is a brilliant introduction and is long overdue. This will allow a child to have a contribution made by friends or parents from the date of birth. A constituent of mine, Mr Peter Drougas, was fascinated by the prospect of such a proposal well before it was thought of by the government. He started writing me letters about what would happen if we were to allow people to make a contribution for children from the date of birth. That was followed by a series of letters to insurance companies. According to a research paper on minors' eligibility to receive super contributions, which the Parliamentary Library did for me, the ability of a minor to receive a voluntary contribution depends on the Superannuation Industry (Supervision) Regulations 1994, which require that:
ĚThe member has, at any time in the two years before acceptance of the contributions, engaged in full-time or part-time gainful employment ...
That, of course, was the limiting factor on contributions being made for young people under the age of 18 as it applied to this point. From now on, people will be able to prepare for their children's retirement. In the old days, people used to buy life insurance packages for their children. Now they will be able to make a contribution up to a set limit to their superannuation, and that is a very useful proposal.
Mr Drougas did some preliminary sums on the scales that he prepared. His sums were at the modest level of $300 per annum, whereas the government's proposals are $3,000 over three years or $1,000 per annum. Mr Drougas made the calculation that, if somebody started their contributions at birth and ceased them at age 60, the total outlay over that period would be $18,000. If, however, somebody began their contributions at the age of 20, their total contribution would be $12,000. It is a difference of only $6,000 but it is over a period of 20 years. At a nominal earning capacity of, say, seven per cent, which may be a little high, Mr Drougas calculated that the earning capacity of the contribution over the period of time runs into many thousands of dollars. His calculations indicate that it is possible for there to be a saving for that individual of $224,056 in a form of superannuation on $300 per annum. That is a huge benefit—$200,000 from a modest $300 a year. On retirement, that is the prospective investment on which annuities will be paid. It is a very fine decision, in my opinion.
The decision to increase the age for superannuation contributions from 70 to75 brings to my mind a dear lady who is the most dynamic worker I have ever met. Immie Medlyn has written to me for years, asking that this provision be changed. Immie would like to see it rise from 70 to 80 years of age because she is one of those brilliant, hardworking people. She even got Alan Jones to write to me saying: `What is happening? Why don't you guys do something to help a genuine person who is fit and well and who wants to work?' The fact of the matter is that there was a discriminatory factor based on age in superannuation and it needed to be changed, and we have changed it. I think it was long overdue. Not only have we changed it but we need to recognise that, of the teenage girls in Australia today, I am told, a third of them will live to be 100 years of age. The demographics are changing. People will have a longer working life. So, in my view, the decision that we have made in regard to this provision backs up a wonderful lady who worked for the Subnormal Children's Welfare Association and the Spastic Centre. She is just such a great, lively worker, and you would not know her age by looking at her. Immie Medlyn of Winston Hills, this is your amendment, in my opinion. The regulations mandated that you could not receive this benefit until these changes. They go a certain distance. I believe that they will have to be changed again in the future.
I refer now to some of the writings on superannuation. The editorial in yesterday's Sydney Morning Herald draws attention to the fact that Australians are not accumulating enough superannuation under the surcharge to have adequate savings to meet the goals set out by Vince FitzGerald in his inquiry a decade ago. That is true. On my calculations, there have been great improvements. Figures elsewhere indicate that the average person, whilst they may not reach the high level of absolute security and dependence on superannuation, will have a little less than $14,000 personal retirement income from the compulsory component of superannuation. This was the superannuation that was legislated for, workers of Australia, by the Australian Labor Party, because they said, `We will not give you wage rises. We will give you super. We will give a pie in the sky when you die.' This government is doing both. This is covering the levy. [start page 2819]
Dr Emerson —That's what you think super is—pie in the sky!
Mr CADMAN —That is a very interesting remark from the person opposite who was prepared to forgo wage rises for workers and who gave them superannuation instead—big satisfaction. This is the government that has provided real wage rises and superannuation for Australian workers and has continued to increase the superannuation surcharge. So much for that argument. The Labor Party should go back and do their sums and start to talk to a few real workers for a change, instead of the elite chardonnay set they mix with now.
The editorial in the Sydney Morning Herald said that there is not enough there for people to live on in retirement. We have made a good start. The fact is, if you look over a 20-year working life there is not enough, but a 40-year working life does bring in closer to a livable income, plus a top-up from a pension. That is a big change, because this generation of Australians is being asked to prepare for its own retirement as well as paying for an increasing number of retirees. So there is a double whammy on the current generation: they have to pay for their own retirement and also, though taxation, for an increasing number of retirees who are going onto pension benefits. This is a period in Australia's history when there is a strain on the system. The editorial states:
The recent report by the National Centre for Economic Modelling and the AMP found that 50- to 64-year-old Australians are worth, on average, just $240,000, half of it as equity in their houses. If they don't sell their homes, they could expect a retirement income—including the age pension—of less than $20,000 a year.
That is not a particularly enlightening revelation, but one has only to look at the changes made in this legislation to see that people who have businesses are now going to be able to put money aside and prepare for retirement, and people who want to increase their contributions are going to be able to do so tax free. There is an increase in the deduction limit for contributions made by the self-employed and there is a deduction allowable for people making a contribution on behalf of their children. I think that some writers of editorials need to have a look at and take into account what is actually happening. The editorial further says:
Immediately, the government needs to decide on a benchmark level of income for all retired Australians and then provide the incentives to help people achieve it.
This is the government that legislated that the pension should rise to be no less than the average full-time male earnings and was prepared for the first time to legislate for those things.
In general, I would have to say that the approach adopted by this government is one that covers the field of need—whether it be for families, whether it be for the elderly, whether it be for self-employed, or whether it be for people who are seeking to improve the level of their income prospects when they retire.
Author: Alan Cadman MP
Source: House Hansard - 5th June 2002
Release Date: 10 Jun 2002