Second Reading SpeechMr Costello (Treasurer)
That the bill be now read a second time.
Over the past few years the government has made a number of significant announcements and implemented a number of important measures aimed at improving the superannuation and retirement income arrangements for all Australians. These changes have demonstrated the government's commitment to assisting Australians to build financial self-reliance for their retirement. Initiatives announced in the 2001 policy statement A Better Superannuation System have enhanced the overall attractiveness, accessibility and security of superannuation. This included the introduction of the co-contribution scheme for eligible low-income earners who make voluntary superannuation contributions, and reductions in superannuation surcharge rates. The policy paper A More Flexible and Adaptable Retirement Income System, released on 25 February 2004, outlined further measures to improve the accessibility, flexibility and integrity of the retirement income system and to reduce red tape. This included the removal of work tests for individuals under the age of 65 who wanted to contribute to superannuation.
A significant boost to superannuation savings was also provided in the 2004-05 budget, which contained incentives to save for retirement worth $2.8 billion over four years, including an expansion of the co-contribution scheme and further reductions in the superannuation surcharge rates. More recently, the government has secured the passage of legislation to deliver choice of fund and reconfirmed its commitment to the superannuation contribution splitting policy. Unfortunately, both of these measures had been held up in the Senate during the last term of the last parliament. In the 2002-03 budget, the government announced that the superannuation surcharge would be reduced at the rate of 1 1/2 per cent per annum from 2002-03 so that it would have reduced to 10.5 per cent in 2004-05. Unfortunately, that reduction was opposed in the Senate and the government was only able to secure through the Senate a reduction to 13 1/2 per cent in 2004-05. In the 2004-05 budget, however, the government announced a policy to reduce the superannuation surcharge, at a rate of 2 1/2 per cent per annum, to 12 1/2 per cent in 2004-05 and reducing to 7 1/2 per cent in 2006-07. Again, unfortunately, opposition from the Labor Party in the Senate prevented the reduction as announced in that budget. The government undertook at the last election to reduce further the maximum surcharge rates.
In pursuance of the policy that we took to the last election, the government has now reviewed the superannuation surcharge. The government now proposes to remove this impost on superannuation savings and abolish the surcharge payable on individual surchargeable contributions and relevant termination payments with effect from 1 July 2005. Approximately 600,000 Australians will receive a boost to their superannuation savings as a result of this measure. It is estimated to cost $2.5 billion over the forward estimates. The superannuation surcharge was introduced in 1996 at a time when the budget was deeply in deficit as a result of Labor's economic mismanagement. It was introduced in 1996 in part to drive the budget back into balance. The government laid down a policy in 1996 to drive the budget back into balance from a $10.3 billion deficit which the Labor Party had left in place.
After bringing down 10 budgets and eight surpluses this measure is no longer required to keep the budget in balance. Accordingly, the government is moving in this parliament to abolish it from 1 July 2005. As I said, 600,000 Australians will receive a boost to their superannuation savings as a result of this measure. The measure presented in this bill will also provide incentives for individuals to make additional voluntary savings through the superannuation system and simplify the operation of the superannuation system.
This will be a major improvement in terms of reducing complexity. The government, when it looked at reducing the rates, as it had tried to do in the 2002-03 budget, was minded of the fact that as the rates reduced, and therefore the revenue raised by it reduced, the administration costs as a proportion increased, because there is quite some considerable complexity in the administration of a superannuation surcharge. That is, administration and compliance costs which may have been justified by a rate of 15 per cent could no longer be sustained at lower rates and as a consequence it makes sense to abolish the superannuation surcharge in its entirety.
The bill that I have commended to the House will do that. We look forward to support from all sides of politics in the abolition of the superannuation surcharge. I commend the Superannuation Laws Amendment (Abolition of Surcharge) Bill 2005 to the House and I present the explanatory memorandum.
Debate (on motion by Mr Fitzgibbon) adjourned.