Second Reading - Protecting your Superannuation

I rise to speak in support of the Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018. The government has been working tirelessly to ensure that more of the money earned by Australians stays with Australians. That's not surprising, really. Everything this government does is about helping Australians do more with their lives and make more of their own choices with their own money. Whether this has been through tax relief for low- and middle-income earners, the reduction of small-business taxes or the extension of the instant asset write-off, this government has been working hard every day to make sure that Australian taxpayers can keep more of their hard-earned money. That's because, unlike the Labor Party, we recognise that government revenue is not our money. It's never our money. It's the money of our constituents. It's the money of working Australians. The 'protecting your super' package is just another example of this Liberal-National government working hard to put more money back in the hands of Australians.

In light of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, these reforms are more necessary now than ever. The royal commission revealed that a number of our large superannuation funds have admitted to charging consumers fees for no service. For instance, AMP admitted to charging fees for no service with regard to superannuation products. Senior counsel assisting the commission, Michael Hodge QC, said a number of super fund trustees have also admitted misconduct or possible misconduct concerning fees for no service. He also said the National Australia Bank superannuation trustee NULIS has acknowledged it engaged in misconduct or conduct falling below community standards and expectations in relation to superannuation.

Public submissions to the royal commission about superannuation have raised concerns about fees for no service, as well as the provision of insurance by super funds that consumers have never sought. Our comprehensive 'protecting your super' package will stop people being ripped off in the superannuation sector, providing significant benefits to the financial security of millions of Australians. That benefits everyone, but it particularly benefits young people and women. For example, around two million women who hold low-balance, inactive accounts will be protected from erosion through excessive fees and inappropriate insurance. This is more common a problem for women than it is for men because there are many women who work a number of different part-time jobs, particularly during the parts of their lives when they are balancing the caring of children with work. Around six million women who are still contributing to low-balance accounts will see hundreds of millions of dollars worth of savings in total, and three million women will have their retirement savings boosted by a total of around $2.5 billion. I will say that again: $2.5 billion. That's thanks to being proactively reunited with their lost or inactive low-balance accounts.

Our 'protecting your super' package achieves this in a variety of ways. For example, schedule 1 will provide greater fee protections so that unfair charges don't eat away at superannuation. In a compulsory superannuation system the government has an obligation to protect members against excessive account erosion. Currently, low-balance accounts face disproportionately high fees and are at risk of erosion, particularly when they're in an account that charges flat fees for an account receiving small or no contributions. That's quite a common thing when a person has had a number of jobs or moved from one job to another and had a new account opened at the time of commencing each new job. When that occurs, the account relating to previous employment often receives no more contributions, but the fees keep ticking on and they aggregate swiftly. The impact upon superannuation balances at retirement ends up being quite enormous over the course of a working career. Under current arrangements, there are no special protections to prevent low-balance accounts from being eroded all the way down to zero.

In 2013, as part of the MySuper changes, Labor, through a decision made by the now Leader of the Opposition, repealed the member protection standards. These standards had protected accounts below $1,000 or accounts held in eligible rollover funds from erosion by requiring that fees not exceed investment earnings. That was a protection in place but in 2013 Labor took it away. The impact on balances has been significant.

Our superannuation package will introduce new requirements to prevent trustees of superannuation funds from charging administration and investment fees and prescribed costs exceeding three per cent of the balance per annum for accounts below the sum of $6,000. Based on the most recent data, it's estimated that around seven million Australians will save around $570 million just in fees just in the first year thanks to these reforms. Think of the aggregate impact of those fees being in the pockets of Australians when they are invested over the course of a working career. We're talking tens of thousands of dollars of difference at the time of retirement. For some people, the impact will be in the hundreds of thousands.

The measure also prevents trustees from charging exit fees on all superannuation accounts. That removes a disincentive for people to take the step of consolidating their accounts, and that's important because it should be the case that a consumer can choose easily and freely where they want to invest their superannuation savings. According to data from APRA, approximately one-third of superannuation funds charge exit fees. As at June 2017, the average exit fee disclosed by superannuation funds for MySuper products was $68, with total exit fees collected across the industry totalling $52 million.

In totality, these measures will help protect erosion of low-balance accounts by high fees and will remove a significant disincentive for members of the Australian community to consolidate their accounts, rolling them over into a single account that works best for them.

Schedule 2 of the bill has an important purpose too. It will work toward tailoring insurance arrangements. The current system requires the provision of default insurance for MySuper members. Default insurance can result in members paying for insurance cover that they aren't aware of, that to their mind they didn't ask for, that goes beyond their needs or which is so inappropriate for their own life or lifestyle that it means they can't, in fact, claim on it. That's not good for consumers. That's a policy that plays into the hands of and serves the superannuation industry and the insurance industry over the needs, the aspirations and the interests of Australian working people.

Insurance premiums can reduce low-income earners' retirement balances by 10 per cent or more, and that increases; it multiplies with every additional policy that is held by an individual. Schedule 2 to this bill prohibits trustees from providing insurance on an opt-out basis to new members who are aged under 25 years, to members with account balances below $6,000 and to members with inactive accounts, unless the member has directed otherwise. This is good. It puts responsibility and choice to take out insurance into the hands of Australians who hold these accounts, but it doesn't penalise those people who, in the busyness of their lives, don't pay all that much attention to their superannuation, particularly in the younger years of their life.

We'd all like people to pay more attention to saving for their retirement. We'd all like people to engage more with the process of selecting superannuation and insurance products that work for them. While we work towards that, we also have to accept the reality that there are many Australians who, at this point in time, are disengaged. This package offers a protection for people who have a low balance, because the insurance premium, which, as a percentage of the balance, is disproportionate to that which someone with a much higher balance would have. It protects people with a low balance from having their balance overly eroded by these insurance premiums. It protects people under the age of 25, who often move from job to job as they find their place in the workforce or as they juggle part-time jobs while they start out in their career or while they are studying. It makes sure they're not exploited by being co-opted, really, against their own understanding, into insurance policies they just don't need.

The changes in this package aim to better target default insurance and minimise balance erosion due to insurance premiums, particularly for individuals who have duplicate insurance cover through multiple accounts. Importantly, these changes don't prevent anyone who wants insurance from their superannuation from being able to get it. Low-balance, young or inactive members are still able to exercise their right to opt in to their insurance at any time through their superannuation account. The impact of these changes is huge. It's estimated that these changes will benefit around five million Australians, who will have the opportunity to save an estimated $3 billion in insurance premiums by having the choice to opt in to this cover rather than just paying for it by default.

Schedule 3 of the bill reforms the ATO lost and unclaimed superannuation money regime. Madam Deputy President Lines, I'm sure you have experienced this yourself and you're familiar with how it works. If you want to reunite yourself with a past superannuation account that's now in the lost and unclaimed section of the ATO, you need to take active steps to do that. There's a process of logging in or completing forms in order to reunite lost super with a tax-paying and superannuation-saving person. The current regime for transferring lost superannuation balances to the Commissioner of Taxation to protect them from erosion requires long periods of inactivity before those amounts are transferred. The impact of that is that the Australian who owns that account has more and more fees eroded by the time that account is ultimately marked inactive, moved to the ATO and placed in the position where it can be claimed. That's replicated once you also start deducting the impact of insurance policies. In addition, numerous exceptions permit trustees to avoid transferring balances below $6,000 to the ATO, allowing these balances to be subject to ongoing erosion all the way down to nil. Under schedule 3 to this bill, from 1 July 2019, all inactive accounts without insurance cover below $6,000 will be protected from further fees and charges by being transferred to the ATO. For the first time, the ATO will also be empowered to proactively return these amounts, along with existing unclaimed superannuation moneys it already holds, to an individual's active account, provided that the combined balance of the consolidated account would exceed $6,000, the member is still alive—that's pretty important—and the ATO is able to transfer the funds to the identified account. The ATO estimates that, on average, it will be able to reunite an amount it holds to its rightful owner within a month of receiving those funds. It's estimated that in the first year of operation this new system will see around $6 billion reunited with the active accounts of around three million members.

The reforms will help individuals who have been forced to hold multiple accounts as a result of restrictions on superannuation choice—restrictions which we propose to lift and which the opposition to date has refused to support. But why shouldn't it be a choice that is in the hands of each and every Australian? Choice is what we are all about. Currently, lost and unclaimed accounts must be requested from the ATO in writing or through the myGov platform, as I've mentioned already. This new process will supplement that existing account consolidation process, which will remain available for those who want it, and it will add an additional service for the Australian people, actively reuniting people who might be disengaged from their financial affairs but who nevertheless are entitled to that portion of their wage which has been saved as superannuation.

While our reforms to super will ensure Australians are left with more money for retirement, the Labor Party wants to hit working Australians not just with fees, not just with insurance premiums but with four new super taxes. These four new super taxes will punish Australians, taking away their savings processes through superannuation. They will abolish the flexibility afforded by the government's catch-up contributions, which allow yearly caps to be carried forward up to five years. They will hit mothers returning from maternity leave and those working in jobs where their income may fluctuate, such as in the tourism or hospitality sectors. They would abolish tax deductibility for personal superannuation contributions, particularly hurting the self-employed. They would hike taxes on superannuation contributions by lowering the non-concessional annual contributions cap from $100,000 to $75,000. And, if all of that wasn't bad enough, they would lower the high-income superannuation contribution threshold from $250,000 to $200,000, on which 30 per cent tax is paid on the contribution, rather than 15 per cent.

Based on Treasury estimates, the combined impact of those policies will hit around one million workers, given each of the four policies would hit around 230,000, 800,000, 17,000 and 130,000 Australians respectively. At the same time, Labor's retiree tax will hit those with self-managed super funds. Two hundred thousand self-managed super funds will lose, on average, $12,000 a year, with many people losing much more. Rather than listening to the genuine concerns of retirees across the country, Mr Shorten and Mr Bowen have dismissed them. They've simply refused to talk to people who have approached them sincerely, pleading for them to not proceed with such a destructive measure.

The choice could not be clearer. Under the coalition government, every day of the week you will pay less tax and you will keep more of your hard-earned money for retirement. You'll get help through those early or disruptive parts of your career when superannuation accounts can become higgledy-piggledy. We'll help you get them all back into one place. We'll help you save money on your fees. We'll help you make sure you're not paying for too many insurance policies you just don't need. But with Labor you'll get $200 billion worth of new taxes and less money to spend in your retirement. Only the Liberal-National government will protect the earnings of Australians, because, after all, we know, and we'll never forget, that it's your money—not ours, not the government's. It's the hard-earned money of working Australian people, and they're entitled to keep it.