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Superannuation Reforms

In parliament today, I spoke about superannuation, and about aged care.

Superannuation Legislation Amendment (Reducing Illegal Early Release and Other Measures) Bill, 11 February 2013

In 1991, the then Prime Minister Paul Keating said of the superannuation guarantee:

‘It will make Australia a more equal place, a more egalitarian place and hence a more cohesive and happier place.’

We do not often talk about happiness and superannuation in the same breath, but I think we should, because a strong superannuation system is a system that ensures dignity in retirement. It ensures that Australian retirees can enjoy that extra grey nomad trip and the comfort of being able to spend time with loved ones without worrying about paying the bills. It ensures that generations that have given much to Australia enjoy the retirement to which they are entitled.

Labor has always had a strong commitment to dignity in retirement. In 2009, we increased the pension—the biggest increase in the pension since its inception. That increase was worth $1,600 a year for singles on the full aged pension. Peter Whiteford from the University of New South Wales estimates that that knocked down the rate of poverty in Australia by about a fifth, from about 14 per cent down to about 11 per cent—one of the biggest decreases in poverty that we have seen. That came as a result of Labor’s decision to raise the pension. That is the broad context for retirement security from this side of the house.

Alas, this has not been bipartisan. If we look to the Leader of the Opposition, he said once, ‘Compulsory superannuation is one of the biggest con jobs ever foisted by government on the Australian people.’ In 1995 he said, ‘Compulsory superannuation is possibly the greatest confidence trick of the last decade.’ It is in that spirit that we were not surprised when the Leader of the Opposition said on 23 March last year:

‘Well, we strongly oppose the superannuation increase. We have always as a coalition been against compulsory superannuation increases…’

and that he said he would therefore oppose them. You can knock him for being wrong but not for being inconsistent. At least he was following true at that point to the things he had said about compulsory superannuation. But now it appears that the opposition have backflipped on superannuation. They say they will now be supporting the increase from nine to 12 per cent. They came into this place and voted against it. It is a phased increase until 2019, but those opposite will now apparently support the increase in superannuation—dragged kicking and screaming to the line—and are now unwilling to back down on this reform.

But you know where those opposite stand when they have the chance to speak out on superannuation. On the superannuation guarantee, Wilson Tuckey said that it was ‘both stupid and dishonest’. Senator Alston said ‘imposing compulsory superannuation on individuals does not increase total savings’—a statement clearly at odds with two recent Reserve Bank discussion papers. Senator Watson from the Liberal Party said ‘unemployment is going to rise’ from superannuation. Those opposite, in their heart of hearts, would really prefer that there was not a universal superannuation system. Just as they fought Medicare at its creation, so too they fought universal superannuation at its creation. Just as they have fought a series of progressive health measures, so too they have fought the increase in superannuation from nine to 12 per cent.

Today, although they may be saying that they are going to support the increase in universal superannuation, they are also going to raise the tax on the superannuation contributions of 3.6 million low-income Australians. That is about one in three workers, and they are the lowest paid workers in Australia. Nearly a third of workers are going to have their superannuation taxes increased by up to $500 a year under the opposition. Of course this is the same opposition who cried foul when the government imposed an additional 15 per cent tax on the superannuation contributions of those earning $300,000 or more in the last budget. That affected 128,000 people and some of the highest earning Australians. This, a measure which benefits 3.6 million of the lowest paid Australians, is a measure that the opposition will claw back.

The superannuation system on which dignity in retirement is founded is a Labor creation. It was Labor that put superannuation in place and has increased it from 9 to 12 per cent. It is Labor that introduced a low income superannuation contribution effective from 1 July last year. It is Labor has put in place a measure to implement a one-off refund of small excess concessional cap contributions breaches from 1 July 2011. Labor has put in place a higher concessional contributions cap for over-50s with low balances, and we have abolished the 70-year-old age limit on the superannuation guarantee. At the same time we are making the system more efficient and making the process of everyday transactions easier through new data and e-commerce standards, the use of tax file numbers as the primary locator of member accounts and facilitating account consolidation and electronic portability.

The Find My Super campaign that I ran locally with ACT MLA Chris Bourke helped link Canberrans to their superannuation. We can also do a lot through the Australian Taxation Office to make sure that your lost superannuation account finds you. Labor is working on those reforms. We have announced new rules to make superannuation simpler and more cost-effective through the MySuper reforms, which are grounded in the Cooper Review. This recognises that choice architecture needs to operate in an environment where many people simply take the default fund and the default option within that fund. Defaults need to have high returns for individuals. The MySuper reforms see that put in place. They ensure that the defaults Australians receive are good defaults. I think this was a notion not well understood in the early 1990s. The emphasis then was very much on choice, but I think a lot of the research since then, particularly some of the studies coming out of behavioural economics, have told us that most people are not active managers of their retirement savings. They want rules that ensure good defaults, and that it what the MySuper reforms put in place.

We are making sure that the directors of super funds are appropriately accountable for meeting their duties towards members. All of this is of a piece with ensuring that Australia can be a financial services hub and ensuring that Australia is a place where we encourage good money management in a way where we ensure that financial advisers are not conflicted and that they have good disclosure for their clients. The consumer credit reforms we have put in place sit alongside the MySuper reforms in making sure that customers get a good deal, making sure we have a system that puts customers first.

To go to the specific provisions of the bill: the bill introduces civil and criminal sanctions for someone who promotes a scheme that has resulted or is likely to result in the illegal early release of superannuation benefits. At the moment, there are not those provisions available for promoters unless they are themselves trustees of a fund. This ensures that those who would seek to benefit from the illegal early release of superannuation benefits can be punished.

The bill amends the Anti-Money-Laundering and Counter-Terrorism Financing Act 2006 to require that superannuation benefits that are rolled over into self-managed superannuation funds are captured as a designated service. That ensures that we take into account the risks of money laundering and financing of terrorism that can be associated with asset rollover and that we have the appropriate customer identification and reporting requirements to ensure that superannuation is not used for inappropriate ends.

The bill amends the Superannuation Industry (Supervision) Act 1993 to introduce administrative consequences for contraventions relating to self-managed superannuation funds. That gives the Commissioner of Taxation effective, flexible, proportionate power to address noncompliance with superannuation laws.

These reforms are essential if we are to ensure that the superannuation system remains a strong system which ensures good investment in Australia—we have seen the pool of assets grow to around the size of Australia’s GDP. These reforms ensure that Australians have dignity in retirement.

I call on those opposite to change their commitment to scrapping the low-income superannuation contribution. They have argued that they are not going to support any measures that are linked to the mining tax, but we know that is not the case because, as soon as the breath was out of their mouths, they then said: ‘Not the increase from nine to 12 per cent.’ The increase from nine to 12 per cent is not small bickies. I understand that each percentage point is around $1 billion of forgone tax revenue for the government. So there is $3 billion sitting right there.

My call to those opposite is: if they are going to support a good measure—increasing superannuation contributions from nine to 12 per cent—why not continue and support an equally good measure in bringing down the tax rate paid by the lowest income Australians on their superannuation contributions? It is a reform that follows the Henry review. The Henry review recommended the tax paid on superannuation contributions should be an individual’s marginal tax rate minus 15 per cent. We have not gotten to precisely that, but we have recognised the wisdom of the Henry review’s recommendation that superannuation taxation should not be a flat tax, that it should be lower for lower income Australians. So we have brought down the tax rate to zero for 3.6 million Australians.

I call on those opposite to support that measure. It is a good measure. It improves dignity in retirement and it improves dignity for lower income Australians, who are disproportionately female workers. As we know, women earn lower wages in the Australian labour market, for a range of reasons—from industry, to discrimination, to career breaks. Women in the Australian workforce earn less and, as a result, have lower superannuation balances. These 3.6 million Australians, disproportionately women, are benefiting from the low-income superannuation contribution. If the coalition were to come to government and scrap it, they would be raising taxes on a group of low-income earners, disproportionately women.

This is as good a measure, in my view, as the increased superannuation contribution. It is an important equity measure and it is an important measure to ensure that Australians in their retirement have the independence to be able to travel, to spend time with loved ones, to enjoy a good retirement. I hope that sense prevails, that the Liberal Party, which has traditionally been deeply suspicious of universal superannuation—since the very inception of universal superannuation—can now see its way to support recommendations coming out of the Henry review that low-income Australians pay less tax. I commend the bill to the House.

Private Member’s Motion on Aged Care, 11 February 2013

On Saturday, 1 December it was my great pleasure to attend the Belconnen Senior Citizens Club’s 30th anniversary party. I went along with my two older boys—my five-year-old Sebastian and my three-year-old Theodore—who I must say were wonderfully feted by the members of the Belconnen Senior Citizens Club. This is a club which is focused on sports and recreation. There are older Australians in the Belconnen area who are engaged in dancing clubs, walking clubs and sports of all kinds. Mal, Noelene and Marj were particularly generous in looking after Sebastian and Theodore, and I also enjoyed seeing new ACT MLA Yvette Berry and her father, Wayne, at the event. It was a great reminder, if one were needed, of the vigour and energy of older Australians in my electorate of Fraser.

Over the last 40 years life expectancy in Australia has increased by around a decade. And one of the great thought experiments is: which would you prefer—an extra decade of life or the economic growth that has come over that period, with approximately a doubling in real per capita incomes? I have barely met a person who says if they had to choose between the two they would take the money over the years. Most of us value that extra decade of life far more than even a doubling in income. It is a reminder of the great advantages of Australia and of the health and lifestyle reforms that have increased longevity. When I hear commentators talk about the ‘problem’ of ageing, I am tempted to reply—as Minister Shorten sometimes does—it beats the alternative. Certainly there are challenges that Australia faces in an ageing population but they are great challenges to have.

On 19 November last year Minister Butler came to my electorate and held with me an aged care forum to speak with Canberrans about the aged care changes that the government is putting through in its Living Longer. Living Better aged care package. The package is improving the wages in the aged care sector and making sure that people have greater access to choice and information. Older Australians and their loved ones often have to make quick decisions and it is important that people have access to all of the information in front of them. It is important that people looking at retirement home options realise that they do not just have to pay bonds but that they can pay daily payments. It is important that people have support if they want to stay in their own homes as so many do.

The forum was the most popular event I have run in my electorate. I held another on 7 December, which again packed out the room in the Griffin Centre. It was a real reminder of the interest that Canberrans have in understanding the government’s aged care reforms. This is a government that is committed to improving dignity in retirement. When we increased the single aged pension for someone on the full rate by $1,600 a year, it decreased the poverty rate. The University of New South Wales’ Peter Whiteford estimated that it reduced by about a fifth the number of people living in poverty in Australia, a massive reduction.

Now the government’s increase in universal superannuation from nine to 12 per cent is again going to see more Australians enjoying dignity in retirement. By bringing down the tax rate on superannuation contributions of lower-income Australians to zero, we are encouraging low-income Australians to save for their retirement. Recognising that low-income earners are disproportionately women, who have lower superannuation balances, this is a measure that particularly advantages women, which is why taking it away would so disadvantage low-income Australians and women. This government is proud of its reforms, of its assistance to people in the aged care sector and of increased longevity in Australia.

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