I rise to speak on the Superannuation Legislation Amendment (Stronger Super) Bill 2012 and the Superannuation Supervisory Levy Imposition Amendment Bill 2012. Twenty years ago, the Keating Labor government introduced one of the greatest and most far-reaching economic reforms in our history—nine per cent superannuation for every Australian worker. Australia’s superannuation pool continues to grow, and today Australia’s super funds hold $1.4 trillion in superannuation savings. As a result of this fundamental change by the Keating Labor government, Australia has the world’s fourth largest pool of privately managed funds, thanks to our superannuation system. I remember that, when we first tried to introduce superannuation reforms, the coalition ran a pretty intense doom and gloom campaign, so I find it amazing that the previous speaker tried to claim credit.
Our superannuation process is a retirement savings system that is the envy of the world. Of course, in developing superannuation industry reforms, the Australian government’s number one aim is to maximise the benefits of superannuation for Australian workers. That is why in May 2009 we commissioned a comprehensive review of Australia’s superannuation system, chaired by Jeremy Cooper. The Cooper review handed its report to government on 30 June 2010, and we released our response on 16 December of the same year. In our response, the government indicated direct or in principle support for 139 of the Cooper review’s 177 recommendations.
The Stronger Super reforms are projected to add an additional $60 billion to Australia’s retirement savings by 2035—that is roughly $40,000 more superannuation for a worker aged 30 on full-time average wages when they retire at 65. This money will add to the retirement savings of Australian workers and over time will flow into the pockets of Australian retirees. It will take pressure off the age-pension system and pressure off ordinary workers in securing a comfortable and dignified retirement. These reforms complement the government’s increase to the superannuation guarantee from 9 per cent to 12 per cent, which will boost the average savings for a worker aged 30 by more than $100,000. Key elements of the Strong Super reforms include: introducing a simple, low-cost default superannuation product called MySuper that has no unnecessary fees or charges and simple features that will make it easier to compare fund performance; raising the bar for those managing our superannuation system, particularly for those managing default superannuation funds in which the majority of Australians invest; providing APRA, ASIC and the tax office with the tools they need to improve their oversight of superannuation; and making the processing of everyday transactions easier, cheaper and faster through the SuperStream reforms. The two bills currently before the Senate are focused on the last element of these reforms. The Superannuation Legislation Amendment (Stronger Super) Bill 2012 amends the Superannuation Industry (Supervision) Act 1993 and the Retirement Savings Accounts Act 1997. It is to introduce a framework to support the implementation of superannuation data and payment regulations and standards. This measure will improve the administration and management of super accounts, making the processing of everyday transactions easier, cheaper and faster for members and employers.
The superannuation industry is currently dominated by paper based transactions and clearly this is not an efficient way to operate in a modern digital world. Not only does it create inefficiencies for the funds themselves but it creates inefficiencies for employers who are contributing on behalf of their workers. The superannuation data and payment standards will allow participants in the superannuation system to communicate by using standardised business terms in a consistent and reliable format. Electronic transmission, using agreed transport and security protocols, will allow for more automated and timely processing of transactions with fewer errors.
A number of benefits will flow from these standards: for superannuation funds, for employers and ultimately for fund members. There will be an improved efficiency in transactions, including the processing of superannuation contributions and rollovers by superannuation entities. Moving to electronic transactions will result in productivity gains for superannuation funds and for the employers making contributions on behalf of their workers. Not only are electronic transactions faster and cheaper than paper based transactions but automating these processes will mean fewer errors. For fund members the benefits will include lower transaction costs, which should lead to lower fund management fees, and more timely payments into their superannuation accounts. It will also reduce the likelihood that member accounts will be lost due to inaccurate or incomplete information. So we are expecting lower transaction costs, lower fund management fees and more timely payments into super accounts, and hopefully the number of accounts lost, inaccurate or incomplete will reduce. Fund members will be able to more easily look up and keep track of their superannuation and check if their contributions have been paid. As a former union official, let me say that I came across a few cases where funds were not paid at all, so I think it is very important that employees are able to check that their contributions have been paid. Large superannuation accounts belonging to the same member can be consolidated more easily and low-value, inactive accounts will be consolidated automatically. The superannuation industry processes an estimated 100 million transactions each year. This costs the industry $3.5 billion, meaning the average cost of each transaction is around $35. Certainly in my book, $35 is too much for one transaction. So you can see the importance of this government’s reforms to make superannuation funds become better at how they manage their members’ money.
Industry submissions to the Cooper review estimated that savings of up to $1 billion are achievable by implementing the SuperStream reforms: $1 billion that will be better off going into the superannuation accounts of Australian workers. The data and e-commerce standards have been developed by the SuperStream working group. By passing this legislation now, we will ensure that the superannuation industry has adequate time to implement the necessary changes to their information technology systems and processes before the data and e-commerce standards become mandated for superannuation funds from 1 July 2013. The government will extend the data and e-commerce standards to large and medium sized employers from 1 July 2014.
The Commissioner of Taxation and the Australian Prudential Regulation Authority will be responsible for regulating compliance with the new data and payment standards. They will ensure compliance through assistance and education and will have some flexibility in dealing with breaches of the standards. The government will incur some costs associated with the implementation of the SuperStream reforms. It is our intention to finance these costs through the introduction of a temporary levy on the industry, the Superannuation Supervisory Levy. The government has projected that we will collect $467 million through the levy from 2012-13 to 2017-18, resulting in a nil overall cost to the government for the implementation of the SuperStream reforms. This is a comparatively small amount compared to the savings I outlined earlier that the industry is expected to reap as a result of these reforms.
Amendments to the Australian Prudential Regulation Authority Act 1998 will enable the costs associated with implementation of the SuperStream measures to be included in the determination specifying the amount of the levy that is payable to the Commonwealth. The Superannuation Supervisory Levy Imposition Amendment Bill 2012 will provide the Treasurer with the ability to make a subsequent determination, for a financial year, of the restricted and unrestricted levy percentages and the superannuation entity levy base. The purpose of this bill is to give the government some flexibility in determining the costs that are to be included in the levy.
These two bills together represent an important plank in the implementation of the Australian government’s Stronger Super reform package. It is a reform that is better for superannuation funds, better for employers and better for fund members. All the stakeholders in the superannuation industry want to see less money going into transaction costs and more money going into the retirement savings of Australian workers. A more secure retirement for ordinary Australian workers goes to the very core of Labor’s ideals. That is why it was a Labor government that introduced our superannuation system 20 years ago. It is now a Labor government that is proposing, and introducing, the Stronger Super package of reforms. And it is this Labor government that has passed measures to increase the superannuation guarantee from nine per cent to 12 per cent.
The increase to the superannuation guarantee is an important reform and an example of how Labor is spreading the benefits of the mining boom to the benefit of all in society. It is a reform that was, shamefully, opposed by the federal opposition. Bizarrely, the opposition supported the 12 per cent superannuation publicly but opposed the minerals resource rent tax, the measure that would fund it. This brings into question whether those opposite are truly committed to strengthening the retirement savings of Australian workers. If they are truly serious about supporting a 12 per cent superannuation guarantee then they need to demonstrate that seriousness by explaining how they will fund the measure. Given that the opposition continue to oppose the MRRT, they need to come clean with the Australian people. What new tax are they going to introduce? What programs are they going to cut to meet the costs to the Commonwealth of raising the superannuation guarantee? The truth is we have a Liberal-National coalition who have never been truly committed to Australia’s superannuation system but have had to reluctantly concede that it has the overwhelming support of the Australian public.
The coalition, as I said, ran doom-and-gloom campaigns when we first proposed the introduction of superannuation, but it is a reform that now has the overwhelming support of the community. So I invite the coalition to get on board with our changes to the superannuation guarantee by explaining how they would fund it were they to form government. They need to either explain their alternative funding mechanism or support the MRRT. Through our Stronger Super reforms, and through the increase to the super guarantee, we have demonstrated that Labor is committed to strengthening the retirement savings of Australian workers. On that note, I commend the bills to the Senate.