Mr STEPHEN JONES (Throsby) (16:05): We are debating a bill to amend our legislation in respect of superannuation. The Labor Party's superannuation policy has an important public policy purpose, and that is to build a pool of individual and national retirement savings so that individuals can retire with some dignity and some income security, and also to provide some relief for future generations in respect of pension payments and meeting the challenges of an aging demographic.
In respect of this the government provides a tax concession on contributions and earnings for moneys going into the fund and the earnings of the fund. You would have to say that on any fair analysis the policy is working. We have over $1.4 trillion in retirement savings invested superannuation accounts around the country. This is close to the fourth-largest pool of superannuation funding anywhere in the world.
It should be the case that early access to superannuation is only available in extremely limited circumstances. By 'early access' I mean prior to retirement. In the cases of severe hardship or other very limited circumstances the trustees of funds may allow early access to this funds and they do not receive high levels of taxation penalties as a result.
Unfortunately, a number of individuals promote illegal early-release schemes. The superannuation system review recommended that the government take action to reduce the illegal early release of super, and the two bills before the House today are aimed at addressing just that. Schedule 1 of the Superannuation Legislation Amendment (Reducing Illegal Early Release and Other Measures) Bill 2012 provides for civil and criminal penalties for those who promote the legal early release of super. The Income Tax Rates Amendment (Unlawful Payments from Regulated Superannuation Funds) Bill 2012, the ITR bill, amends the law to ensure that superannuation benefits pulled out as part of some illegal early release are taxed at 45 per cent.
Schedule 1 to the Superannuation Legislation Amendment (Reducing Illegal Early Release and Other Measures) Bill 2012 amends the Superannuation Industry (Supervision) Act to introduce civil and criminal sanctions for a person who promotes a scheme that has resulted, or is likely to result, in the illegal early release of superannuation benefits. The government's super system review found that stronger sanctions must exist to deter the promoters of illegal early-release schemes from undermining the government's retirement policy and, in addition, harming members in the process. The review found evidence of promoters who were pushing these schemes charging very high commissions for convincing sometimes unwitting investors to roll their money over from a compliance scheme into one of these early-release schemes and taking as high as 50 per cent in commissionunconscionable behaviour that should be condemned by all members in this place.
Currently, there are no specific penalties for the promoters of illegal early-release schemes who are not themselves trustees of a regulated superannuation fund. Often the promoter will not be a trustee of a purported superannuation fund used in a scheme but instead recruits other parties for the role. This measure delivers on the government's announcement that it would introduce penalties to deter the promotion of these sorts of schemes. It will allow the commissioner to seek civil and criminal penalties for those who promote these early-release schemes. The review also found that those individuals who gain illegal early access to their superannuation benefits should not enjoy the same tax treatment as that which is designed to promote that public policy purpose. The review recommended that amounts released by illegal means should be subject to the superannuation fund non-complying tax rate of 45 per cent.
The Income Tax Rates Amendment (Unlawful Payments from Regulated Superannuation Funds) Bill 2012, being considered in cognate with the first bill, imposes the superannuation non-complying fund rate of 45 per cent on those amounts that are released early by illegal means. These measures will ensure strong sanctions are in place to deter the illegal early release of superannuation.
Schedule 2 to 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. The super system review noted that, since trustees and members of SMSFs are generally the same, there is greater scope for assets once received in the self-managed superannuation fund to be diverted for an illicit purpose. By capturing rollovers into self-managed superannuation funds as a designated service under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, the transferring superannuation fund will have to comply with a range of obligations, including customer identification requirements and reporting obligations. This measure will ensure that consideration is given to the money-laundering and terrorism-financing risk associated with the rollover of assets to a self-managed superannuation fund.
Schedule 3 to the bill amends the Superannuation Industry (Supervision) Act 1993 to introduce administrative consequences for contraventions relating to self-managed superannuation funds. The super system review found that the Commissioner of Taxation, as regulator of self-managed funds, needs to have effective, flexible and proportionate powers to address noncompliance with the superannuation laws. Currently, the commissioner has a very limited number of tools available to address instances of noncompliance. The review acknowledged the benefits that the current penalty regime provides to deal with and deter noncompliance; however, it highlighted some areas of the current regime which limit the commissioner's ability to achieve optimal regulation.
Applying the current penalties can be costly and time consuming, and the potential consequences can be disproportionately high. The absence of graduated penalties results in a number of self-managed superannuation fund trustees avoiding sanction for contravening conduct by simply rectifying the conduct when it is detected. This may be appropriate in some circumstances, but it is not appropriate if the trustees can continue to contravene the law and therefore their actions simply have no consequences. The review recommended that the commissioner be given additional tools, both educational and punitive, in conjunction with existing powers. These tools will support the ongoing integrity of the superannuation system. This measure delivers another stronger super reform for self-managed superannuation funds.
On this side of the House, we have a strong commitment to Australia's superannuation system. It was, after all, the Australian Labor Party that built the system and added to it. We built it over the vehement opposition of the coalition, who have never been supporters of occupational superannuation. They see it as some form of socialist plot. Every time we have had the opportunity to bring into this place measures which advance the capacity of workers to add to their retirement savings, those measures have been met with vehement opposition by those on the other side of the House.
But this government is increasing its commitment to workers' superannuation, particularly by increasing the superannuation guarantee. Those from the coalition parties really did deserve an award in hypocrisy when, in previous weeks, they raised questions and tried to speculate about what might be in the forthcoming budget when it came to workers' superannuation when they themselves, only months earlier, had opposed measures to lift the superannuation guarantee from nine per cent to 12 per cent. This measure alone will boost the retirement savings of 8.4 million Australians by about $85 billion over 10 years and add about $500 billion to our pool of retirement savings by 2035. That means around $118,000 to the retirement superannuation balance for an average worker who is 30 years old today.
Labor's super reforms also provide an annual contribution of up to $500 into the superannuation accounts of workers earning less than $37,000. This is a measure that came into effect on 1 July last year. It will enable workers aged between 70 and 74 to receive contributions for the very first time since the introduction of compulsory superannuation. This is a measure that will come into effect from 1 July this year. It also creates a new low-cost superannuation product called MySuper. Again, this is a measure that will come into effect from 1 July 2013.
In stark contrast, the coalition have confirmed that they would re-impose a 15 per cent tax on Australia's lowest paid workersthat is, those earning below $37,000 per annum. This group of people includes 2.1 million working women. The opposition leader announced at the National Press Club recently that, if elected, the coalition would abolish the low-income superannuation contribution. That is, those workers earning over $37,000 a year who are currently having $500 per year diverted into their accounts by the federal Labor government, adding to their retirement income, will have that reversedstopped, knocked on the headif the Leader of the Opposition ever becomes Prime Minister of this country.
The coalition policy constitutes a superannuation tax increase of up to $500 on every Australian worker earning below $37,000. If you just think about it for a moment, their policy is to abolish our policy of increasing the tax-free thresholdnearly tripling the tax-free thresholdup to $18 thousand, so that nobody earning less than $18 thousand pays income tax. On top of that, they are going to whack these workers' superannuation by another $500 per annum in additional taxation. It is quite clear to see where their priorities lie, and it is reflected in the focus of their contribution on this legislation.
The purpose of the low-income superannuation contribution is to effectively refund the tax that is paid by low-income earners on their concessional superannuation contributions, including the superannuation guarantee of up to $500 per annum. Because of their lower income tax rate, lower income earners otherwise do not get the same concessional benefits as workers on higher incomes do. They do not have access to a whole heap of the benefits that higher income earners may have when it comes to minimising their tax arrangements through superannuation contributions.
Treasury analysis says that there are around about 3.6 million workers earning less than $37,000 per annumso it is not a small group of peopleincluding, in my own state, around 1.1 million workers who would be affected by this retrograde change. That is roughly three out of every 10 workers in Australia. So, far from decreasing taxes and increasing retirement savings of Australians, the coalitionled by the member for Warringahwould go into the election opposing the low-income superannuation contribution while also opposing our policy of raising the superannuation guarantee from nine to 12 per cent. It also immediately destroys the coalition's so-called commitment earlier in the week to make no changes to the superannuation system. The re-imposition of a $1 billion per year tax on 3.6 million workers is an unexpected, unfortunate and dramatic change by any assessment.
If Australians want to ensure that they have decent policy protecting their retirement incomes, they should support members in their electorates who support the sort of legislation such as that before the House today, and the party that brought occupational superannuation to the Australian people. I commend the legislation to the House.