SUPERANNUATION LEGISLATION AMENDMENT BILL 2002: Second Reading
Senate Chamber
18th November 2002 Senator CHAPMAN (South Australia) (1.29 pm) - Concerning the Superannuation (Government Co-contribution for Low Income Earners) Bill 2002 and the Superannuation Legislation Amendment Bill 2002, we have just heard from Senator Wong that the Labor Party is opposing the legislation to reduce the surcharge on higher income earners-and I say `higher income earners' advisedly. Senator Wong refers to them as `high-income earners' but at the level of income from which the surcharge applies you could hardly call them high-income earners. However, the incomes certainly are higher than those to which the surcharge does not apply. Senator Wong's argument is that the Labor Party will not support the surcharge because it benefits, in her terms, `high-income earners'; in other words, because it is a tax cut for `high-income earners'. She completely ignores the fact that these `high-income earners' already pay a higher rate of income tax on their earnings because of our progressive income tax system and therefore are paying 50c in the dollar in personal income tax on a very significant proportion of their incomes. Senator Cherry - Unless they've got a trust. Senator CHAPMAN - You do not know much about trusts, Senator Cherry, because they have a very limited impact on the payment of income tax. The other point that Senator Wong ignores is that these individuals will continue to pay a higher contributions tax even after this measure to reduce the superannuation surcharge is fully operational after three years. It reduces the surcharge by nearly five per cent over three years, from the current level of 15 per cent down to a level of ten and a half per cent. That means that, at the end of three years, the people to whom this surcharge applies will still be paying a contributions tax of 25 per cent. This compares with those on incomes below the threshold, who will be paying a contributions tax of 15 per cent. So, again, those on the higher incomes are still paying a higher rate of contributions tax as well as the higher tax rates which apply to them in general terms, which I mentioned a few moments ago. What we need to recognise is Labor's utter hypocrisy on this issue of the surcharge. It was the Labor Party in government that initiated front-end taxes on superannuation. Of course, it was the Labor Party in opposition that opposed tooth and nail the introduction of this surcharge-a surcharge that was introduced, as Senator Watson said a few moments ago, as an equity measure at a time when the government needed, on the one hand, to restrain spending and, on the other, to increase revenue, to rid this country of the massive annual budget deficit that we inherited from the Labor Party. The incompetent financial managers that made up the previous Labor government left us in 1996 with an annual budget deficit of some $10 billion and a total government debt that had accumulated over their time in office-an accumulated debt as a result of successive deficits-to almost $100 million. Our government had to restore balance to the government's finances and to get them in some semblance of order, and we sought to do that in an equitable way through equitable measures by not only cutting spending and achieving savings through efficiencies in the operation of government departments but also applying this superannuation surcharge to those who were on higher levels of income. Senator Wong describes them as `high-income earners'; I would describe them as those earning `above average incomes' but by no means necessarily high incomes, at the level at which this surcharge cuts in. Nevertheless, it was regarded by the government as an equity measure so that people at those income levels would be making some contribution towards overcoming the regrettable mess that was inherited from the previous Labor government. Of course, Labor opposed that surcharge tooth and nail. Senator Sherry is sitting over there talking to Senator Cherry; it was Senator Sherry who, I recall, day after day in this chamber asked questions about this surcharge of the then Assistant Treasurer, Senator Rod Kemp-now the Minister for the Arts and Sport-and who argued day after day that this was an additional and unnecessary tax. Now, lo and behold, some years later when, having restored the government's financial position, the government is in a position to reduce some taxes and has taken the decision to reduce this surcharge as a consequence-because it was, as Senator Watson said, only a temporary measure to try to solve some of those financial difficulties-the Labor opposition, having opposed tooth and nail its introduction, now opposes tooth and nail its reduction. Senator Abetz - You just can't believe them, can you? Senator Eggleston - Quite unbelievable. Senator CHAPMAN -You cannot believe them, as Minister Abetz says. They are quite unbelievable, as the Deputy Government Whip, Senator Eggleston, says. It is the ultimate example of the Labor Party's hypocrisy. This is a tax they opposed tooth and nail when it was introduced. We now want to reduce it-just reduce it, not try to eliminate it at this stage, although I would certainly like to see that happen down the track when the government is in a financial position to do that-and now they are opposing that reduction tooth and nail. What hypocrisy! Senator Abetz -Opposition for opposition's sake. Senator CHAPMAN -It is interesting that you mention that, Minister Abetz, because that is a note I have written here in my scrawly handwriting. I see the words here among the notes I jotted down while I was listening to Senator Wong: `Opposition for opposition's sake.' It is no mystery why the Labor Party are currently being treated with absolute disdain by the Australian community-they do not want a bar of the Labor Party. The polls show that Labor's community support is at one of the lowest levels ever. The Labor opposition are being treated with absolute disdain by the Australian community. The reason is that they offer no alternative to the present government-quite apart from the fact that the present government is doing a great job in providing the policies, the initiatives and the economic and social environment that this country needs and that the Australian people want. So, admittedly, there is not much that the Labor Party can offer as an alternative, because of the good job that the government is doing. But, having said that, let me tell you that they do not offer anything. They offer no policies: six and a half years in opposition and they still have not knuckled down to do the hard policy work that is needed if a party is ever going to present itself as an alternative government to the people of this country. They have not done the sort of work that we did during our years in opposition, when we reviewed what had happened when we were previously in government, reviewed our policies and initiated a whole raft of new policies, from taxation reform to workplace relations reform to trade reform-a whole raft of new initiatives which our government have taken since we came to office six and a half years ago, based on the hard yakka that we did in opposition to develop and analyse the policy position, to have those policies to put forward to the Australian community and to have them endorsed at elections. But the Labor Party have done none of that work. All they can do is adopt a position of opposition for opposition's sake. Of course, that is exactly what they are doing with regard to their opposition to this legislation to reduce the surcharge on superannuation. That needs to be understood in this chamber and it needs to be understood by the Australian community. The two pieces of legislation that we are debating this afternoon are very important for the future of superannuation in this country. The Superannuation (Government Co-contribution for Low Income Earners) Bill 2002 enacts legislation to establish the arrangements for the government to pay superannuation co-contributions to eligible low-income earners. The legislation outlines how the government will determine those who are eligible for a co-contribution, the amount of the co-contribution, the method of payment of the co-contribution and how the government will determine adjustments where necessary. It also includes the information gathering arrangements for the Australian Taxation Office in relation to eligibility for the co-contribution, the method of review of decisions and other administrative matters. Importantly, this bill, together with the Superannuation Legislation Amendment Bill 2002, will fulfil an election commitment, which was announced on 5 November 2001 in A Better Superannuation System-the government's policy at the last election. Again, even in government, the Liberal and National parties continue to do the hard yakka on policy development. They have specific new policies to present to the people for their endorsement at elections-as we did with our policy for A Better Superannuation System at the election last year. This policy was designed specifically to further assist low-income earners to save for their retirement. We had Senator Wong, as I said, a few moments ago opposing the surcharge. She said this government is only interested in superannuation changes that will help high-income earners. She completely ignored the issue with respect to the other piece of legislation we are debating, which does make up a balanced package of two bills-quite contrary to what Senator Wong was saying. We are, through this co-contribution bill, providing a better system whereby low-income earners can also gain the benefits from superannuation for their retirement. The specific purpose of this legislation is to assist low-income earners to save for their retirement. The government co-contribution is expected to increase the numbers of low-income earners making personal superannuation contributions and to increase the level of contributions being made by existing contributors. More generally, the government co-contribution will boost the retirement savings of low-income earners. It is important to recognise that, in the future to enjoy an adequate level of retirement income, people at all income levels, to the extent that they are able, will need to save for their retirement. People at the lower end of the income scale will need to rely on three sources of retirement income: the age pension, their own contributions to superannuation through being assisted by this co-contribution legislation, and the superannuation guarantee required to be paid on their behalf by employers. They will need all of those three sources of income to enjoy an adequate retirement income. So this initiative is extremely important in terms of encouraging low-income earners to make their own contributions towards their retirement incomes. The government co-contribution will replace the existing taxation rebate for personal superannuation contributions made by low-income earners. It will be more generous than the rebate it is replacing. So, again, this government is being more generous than the previous Labor government by putting in place a system to encourage low-income earners to contribute to their retirement income. The maximum co-contribution of $1,000 compares more than favourably with the maximum rebate of $100 that was previously in place. Low-income earners who are not entitled to claim a deduction for their personal superannuation contributions will be eligible to receive the co-contribution if they meet the eligibility criteria. The government co-contribution will match personal superannuation contributions made on or after 1 July 2002 by eligible people with incomes less than $32,500 a year. The maximum co-contribution of $1,000 will be payable for those on incomes of $20,000 or less. The maximum co-contribution will reduce by 8c for every dollar of income over $20,000 and will phase out once incomes reach $32,500. On an income of up to $20,000, a person will receive full co-contribution funding of $1,000 from the government. Between that amount and the cut-off point of $32,500, the co-contribution rate reduces by 8c in the dollar for each dollar the income rises, but everyone on an income up to $32,500 will receive some co-contribution from the government in relation to superannuation contributions which they themselves make. Also, a minimum co-contribution of $20 will apply as long as the person is below the income threshhold and as long as they have made some personal contribution to their superannuation fund during the year. The income test for the government co-contribution will be based on assessable income plus reportable fringe benefits and this is consistent with the existing rebate. To be eligible for the government co-contribution, a person will need to have employer superannuation support, be aged less than 71 years on 30 June of the year in which the personal contributions were made, and not be eligible for release of benefits upon permanent departure from Australia. Small business people who are self-employed will be unaffected by this proposal, as they will be able to continue to claim a tax deduction for personal superannuation contributions. One of the government's other election commitments increases from $3,000 to $5,000 the amount of personal superannuation contributions that is fully deductible for this self-employed group. Similarly, those with superannuation support but not employer superannuation support will be eligible for a taxation deduction for superannuation contributions. The government co-contribution will be treated as an undeducted contribution. This means that the co-contribution will not be subject to contributions tax when paid into the fund and will also not be taxed when paid out to a person as an end benefit: a very important point to remember. This is an undeducted contribution; it will not be subject to taxation either when it is deposited or, importantly, when it is drawn out by the superannuation beneficiary. In situations where it is paid directly to the person, it will be treated as exempt income and therefore will not attract income tax. The Australian Taxation Office will use contribution and account details provided by superannuation funds, together with the income details from low-income earners' tax returns, to assess and pay the co-contribution directly to the person's fund. That is, there will be no need for eligible people to apply for the co-contribution. It will be, in fact, automatic. This delivery mechanism is the most seamless option for low-income earners and is designed to ensure that low-income earners who are eligible for the co-contribution receive their correct entitlements. While funds will need to report new information from that currently required, this requirement will not commence until 1 July 2003. This will provide superannuation funds with a window in which to implement any necessary system changes. That half of this balanced package of important legislation will establish this generous co-contribution to be provided by the government, which, as I said earlier, was a specific commitment made as a result of policy work on superannuation done in the lead-up to the last election. The other half of this balanced package is that to which I addressed some remarks at the outset in dealing with comments made by the Labor opposition-that is, the Superannuation Legislation Amendment Bill 2002, which amends a number of taxation and superannuation laws not just in relation to the co-contribution measure, which I have just been discussing, but also in relation to reducing the maximum superannuation and termination payment surcharge rates from 15 per cent to 10.5 per cent over the next three years. That measure is, as I have already said, fully justified. It is important to remember that the surcharge was a temporary measure. It was introduced by the government as part of necessary budgetary measures to overcome the substantial annual deficit that we were left with by the Labor Party and to begin to pay off what was nearly $100 billion of accumulated debt: an achievement with which the government have been very successful. The minister might correct me, but we now have that accumulated debt down to about $30 billion, as I recollect. That is an outstanding performance by the government in sound economic management and in restoring the government's financial position, and it has had a major positive impact on the strong rate of economic growth this country has enjoyed over the last several years. The rate of growth has been better than that of any other developed country over the last few years and has been reflected in real wage increases of benefit to all workers but particularly to low-income earners. This, in turn, provides them with a better opportunity to save for their retirement. This package of measures is very important, and the incentives it contains will encourage that very important saving for retirement to ensure that people will be able to enjoy adequate income in retirement. (Time expired) |
