Government has eroded confidence in superannuation

I thank the member for Robertson, who is opposite. The member for Casey has outlined the coalition’s position on these superannuation bills extremely well, so I will settle on his remarks.

I really want to talk about the fact that the government has eroded confidence in superannuation in this country. As we know, superannuation is one of the most important issues facing both the Australian economy and individual taxpayers. It is one that has become more important for the majority of working Australians as their superannuation balances grow.

They are now watching over their planned retirement nest eggs very closely, particularly self-funded retirees right at this moment. What they have been and are desperately looking for is consistency and certainty—the confidence that their accumulated funds are safe.

What they do not want to see is constant change, and that is what they have seen from this government, a government that has constantly played with this superannuation system and constantly changed the laws. Unfortunately, uncertainty is exactly what they have been getting.

The Gillard Labor government obviously sees superannuation as a golden goose—the national money reserve or perhaps the Labor government’s own piggybank that it can raid at will to prop up its budget and hide its fiscal incompetence, which we have seen in great depth in the latest budget.

Superannuation account holders know this and they are worried.

These people talk to me on a daily basis and are desperately worried, but the government does not understand that.

They actually know that Labor is constantly playing games with their superannuation, with their nest eggs. They say to me, ‘What is the government going to do next?’ They have no idea what the government is going to do to them next.

If you are a self-funded retiree, this is a very important issue.

We see the tax increases included in the bills before us. Superannuation was set up to fund people’s retirement in their senior years, not to be a mechanism that Labor constantly changes and uses to prop up, as we have seen, wasteful spending, debt and deficits.

We have seen all of the changes that have been made. Taxes on superannuation have increased by more than $8 billion. They have predominantly targeted low- and middle-income earners, despite the pre-election promises of there being absolutely no changes—’not one jot,’ as we heard, ‘and not one tittle’.

The changes included the $3.3 billion Labor cut to super co-contribution benefits for low-income earners, reducing the co-contribution benefit from $1,500 to $500. We saw changes to the concessional caps.

They went from $50,000 down to $20,000 but now they are back to $35,000. Who knows what is next?

Financial advisers and accountants tell me that they no longer know how to advise their clients appropriately.

They tell me that their advice has to be provided on the laws as they are today, but how do they help people plan when the changes are so constant?

It is probably time that we have a debate that the government has not had about what superannuation is meant to achieve and whether the current system is actually achieving those goals.

It is widely considered that compulsory superannuation introduced by the Hawke-Keating governments was well designed in the goal to replace the government-funded retirement pension of the majority of working Australians with a self-funded one through superannuation contributions.

As a worthy cause, the question still remains about who funded it. It was sold on the premise of gradually increasing the superannuation contributions being paid by Australian businesses which were to be partially offset by a reduction in wages growth.

This way both employers and employees were to contribute to that. In some cases this applied but in many others wages growth continued unabated and once again the employers had to shoulder that additional burden.

The impact the changes have on those who are currently at retirement age or nearing retirement age is really a critical issue.

We know that compulsory superannuation began in 1992 and the majority of workers have perhaps accumulated only half of a working life of superannuation.

Every time the government attacks superannuation it affects those people. For those who are nearing retirement without significant voluntary contributions, those relying on employer contributions, the benefits are going to be very moderate indeed

Every time the government changes the rules and, as we see, takes an additional tax from this, it affects those people.

There are those as well who have been affected by the changes to the contribution caps. Many will attempt to retire with under $200,000 in superannuation, which would only offer a small contribution to their retirement income.

They may take $10,000 to $15,000 a year without impacting on their capital, but it is hardly sufficient. They will require a part pension just to survive.

Their alternative is to eat into their capital and run out of super at around 70 years of age, relying on the pension from then on. It is that group who need to catch up on their super who are directly impacted by the bill before the House.

The intent of super is being interfered with by the government under this bill. The goal of superannuation to save the government welfare expenses is the worthy value of self-responsibility that is enshrined in Liberal philosophy, and that is one issue.

However, if the goal is to provide a certain level of retirement comfort, what is that level at the time of retirement? That question needs to be discussed.

Are we creating expectations beyond the impending average reality? This is a question the current government should be answering but has failed to address.

At a basic level, Australians save for two main long-term goals and a number of shorter term goals.

If you talk to them, often these goals are different. Their long-term goals often involve buying the family home and saving for their retirement.

Those are often the most basic things that they say they are saving for. These goals cannot be held in isolation, because both of them impact on the retirement lifestyle of older Australians.

Those in the worst position have no lifetime savings and do not own their own home, which leaves them in a vulnerable position.

To have one or the other is also problematic. Many retirees currently use part of their superannuation to pay for a house or to pay off their mortgage. While it might seem a secure option, it often leaves the super fund without enough capital to fund retirement living.

In such cases, a part pension ends up being required. In fact, in many cases it is not only an undesired outcome but part of how people plan. Unless we address the need for both housing stability and financial independence, we will never properly manage the retirement needs of our community.

The answers to these questions would guide the debate on the current bill, which highlights Labor’s agenda to tap into super for the government’s own benefit. But this agenda does little to address the benefits for superannuants.

According to the explanatory memorandum, schedule 1 to the Tax and Superannuation Laws Amendment (Increased Concessional Contributions Cap and Other Measures) Bill 2013 amends the existing legislation to increase the concessional contributions cap temporarily to $35,000 for the 2013-14 financial year and to $35,000 for the 2014-15 financial year and later financial years for individuals aged 50 years and over.

The temporary cap will cease when the general cap indexes to $35,000.

We should all remember that it was the Labor government that dropped the concessional cap in the first instance for superannuation from $50,000 to $25,000 during its first term in government.

The result of this was to slash the capacity of the average Australian to top up their super—those who were working hard, taking responsibility for their retirement, especially those in the later years of their earning capacity with fewer years to accumulate superannuation.

Instead of allowing more self-determination, which as I said is coalition philosophy, the Labor government has reverted to its natural position of success envy and someone else always being responsible.

In this case, as in most cases, that someone ends up being a combination of small- and large-business owners and the government.

Concessional contributions are defined as those contributions which are included in the assessable income of a super fund and include employer contributions and tax deductible personal contributions.

They in effect share the load of the contribution between the superannuant themselves and the government, which forgoes some revenue as its contribution.

The result of applying caps is to limit the amount of money an individual can contribute to superannuation, which is taxed by concession, thus limiting the government contribution by limiting the tax forgone.

Thus increasing the cap in the current bill to $35,000 for those aged over 60 years this financial year and those aged over 50 years the following financial year, as proposed in this bill, will assist them to fund their own retirement.

That is not what Labor has previously promised the Australian people on the record. As we know, breaking promises, unfortunately, is core business for Labor. In 2010 Labor promised that that concessional cap for people over 50 with less than $500,000 would be permanently raised to $50,000. This has turned into another broken promise. Of course, we know that the only thing they can be relied on to deliver is uncertainty.

I wanted to touch on the issue as well of the impact that people have had in relation to penalties—the aggressive and punitive approach to the accidental overpayment of contributions and the massive penalties.

I have had many people affected by this. There has been example after example, and mostly of an inadvertent overpayment into super funds. The penalties have been absolutely crippling for some people—up to 93 per cent.

Overpayment, as we know, can happen as easily as a misjudgement of the timing of an employer payment, pushing one payment from the financial year planned into the next one.

In some instances this has been known to push the total over the cap, resulting in just the most punitive and massive penalties—as I said, up to 90 per cent of the overpayment disappears in penalties and taxes.

The government’s penalty system has been unfair and outrageous, and let us acknowledge it for what it really is: it has been nothing more and nothing less than another government cash grab, and people have known this for a fact. What we will see is that for the 2012-2013 and 2013-2014 financial years, the cap for all individuals will be $25,000.

In later financial years, the bill will see the cap indexed annually in full-time adult average weekly ordinary time earnings published by the Australian Statistician. Through this measure, it will one day hit $35,000 from the current $25,000. But this is going to take time, and it was $50,000.

Schedule 3 of the bill before the House amends the law to reduce the tax concessions that individuals with income above $300,000 receive on their concessional superannuation contributions from 30 per cent to 15 per cent by imposing tax under division 293.

Concessional contributions are subject to a flat tax rate of 15 per cent regardless of the income of the individual contributor. It is true to say that if those individuals had instead had the concessional super contributions included in their salary and wages or business income, the high-income-earning individual would have been taxed at this income at a marginal tax rate of around 45 per cent.

The result is a 30 per cent concession on the super contributions of those otherwise hitting the top bracket. It is expected that around 1.2 per cent, or 129,000 people, contributing to super will be affected by the reduced superannuation concession.

It just simply continues Labor’s attack on those it considers to be wealthy, and it continues the unfortunate class warfare we have seen so much of.

As I said, the issue of the aggressive and punitive approach that the government took to the accidental overpayment of contributions and the massive penalties has had a major impact on people in my electorate.