House of Representatives

Tax and Superannuation Laws Amendment (2012 Measures No. 1) Bill 2012

Second Reading Speech

Mr Shorten (Minister for Financial Services and Superannuation and Minister for Employment and Workplace Relations)

I move:

That this bill be now read a second time.

This bill amends various taxation and superannuation laws to implement a range of improvements to Australia's tax laws and retirement savings system.

Schedule 1 ensures that a health supply by a healthcare provider paid for by an insurer, statutory compensation scheme operator, compulsory third party scheme operator or a government entity under a health funding arrangement, is treated as a GST-free supply.

GST-free treatment applies where the underlying supply from the healthcare provider to the individual is a GST-free health supply. For example, if the Department of Health and Ageing pays a doctor to treat a veteran then the supplies will be GST free.

This will avoid increased compliance costs that would otherwise arise for taxpayers in multiparty arrangements involving supplies of health related goods and services.

These amendments restore the intended operation of the GST law following the department of transport decision, ensuring that multiparty arrangements involving relevant health related supplies of goods and services are GST free.

These amendments apply from 1 July 2012.

Schedule 2 ensures that the non-commercial activities of government related entities are not subject to GST. The amendments restore the policy intent of the GST law concerning government appropriations following the 2009 full Federal Court decision in TT-Line.

These amendments ensure that a payment under a government appropriation is not subject to GST if it is made between government related entities for non-commercial activities.

For example, a payment made by a state Department of Education from state government funds will not be subject to GST if it is paid to a public school.

The amendments will ensure that government entities do not face an increase in compliance costs and do not have to change their budgetary processes and practices.

These amendments apply from 1 July 2012.

Schedule 3 pauses the indexation of the superannuation concessional contributions cap for one year.

The general concessional cap is indexed annually in line with movements in full-time average weekly ordinary time earnings. The cap only changes, however, when the cumulative indexed amount reaches $5,000 or greater.

It was expected that indexation would increase the general concessional contributions cap from $25,000 to $30,000 in 2013-14.

This schedule pauses the indexation of the cap in 2013-14, which means that the cap is now not expected to increase to $30,000 until 2014-15. As a result, the increase in the higher concessional contributions cap for individuals aged 50 and over, and the non-concessional contributions cap will also effectively be paused in 2013-14.

Schedule 4 gives eligible individuals the option to have excess concessional contributions taken out of their superannuation fund and assessed at their marginal tax rates, rather than incurring the potentially higher effective rate of excess contributions tax.

This measure will make the concessional contribution caps fairer by giving most individuals who exceed their concessional contributions caps a second chance.

This measure applies to excess concessional contributions of $10,000 or less made in the 2011-12 and later financial years.

This measure is expected to benefit just over 30,000 individuals who exceed their concessional contributions caps over the forward estimate period.

The ATO will handle the majority of the administration process to minimise the additional compliance cost on funds and the individuals.

Successful passage of this bill will make the concessional contributions caps fairer.

Schedule 5 includes a further exception to the secrecy provisions in division 355 of schedule 1 to the Taxation Administration Act 1953.

This measure is part of a broader package of superannuation measures aimed at making it easier for superannuation funds and their beneficiaries to locate and consolidate unnecessary and lost superannuation interests and benefits.

This measure will allow the ATO to disclose superannuation information to superannuation entities, exempt public sector superannuation schemes, retirement savings account providers and their administrators.

This measure will expand the types of accounts to be displayed on the ATO online search facility. It will also permit tax officers to disclose information where it is for the purpose of assisting a beneficiary of a superannuation fund to find, consolidate, transfer, cash or otherwise manage their beneficiaries' superannuation interests and superannuation benefits. From 1 July 2012, this schedule will enable individuals to view their superannuation accounts which are reported to the ATO on member contribution statements, as well as lost accounts and other superannuation moneys held by the ATO. It will also enable funds to search online for their members' superannuation accounts known to the ATO, including lost accounts and ATO held moneys.

The Office of the Australian Information Commissioner has been consulted on these amendments, and has indicated that it is not opposed to the extended use of the TFNs as a means of promoting efficiency in the superannuation system where there is a likelihood of significant benefits for individuals and where personal information is protected.

Schedule 6 delivers on one of the central elements of the government's Securing Super package, announced during the 2010 election campaign. It requires employers to report to employees, on payslips, not only how much super they will be paying, but also when they plan to pay it. This measure comes into force on 1 July 2012.

This measure will address a huge problem, in that a significant minority of employers fail to pay their super.

During 2010-11 the ATO investigated 17,943 employee complaints, raised superannuation guarantee entitlements for nearly 279,000 employees, raised $517 million and collected $269 million in superannuation guarantee charge, and collected $139 million in penalties.

Employees worst affected tend to be those who are most vulnerable, that is, low-income, casual and part-time workers.

Giving employees more information about their super is important. While the ATO proactively audits high-risk employers, it cannot monitor all superannuation contributions. For this reason, the system depends crucially on employees monitoring their contributions.

But, currently, employees do not receive information on their contributions in time to take action. The law used to require employers to report their contributions within 30 days of making them, but the opposition, when in government, abolished that requirement in 2004.

That is why the Gillard Labor government is taking strong action to make sure employers do the right thing.

Under the broader Securing Super package, employees will receive information on their payslips about when their super will actually be paid into their account, and quarterly or six-monthly notification from their super fund about their contributions.

This schedule will enable employees to know when they can check with their fund that their contributions have been made. And the measure will reduce the time it takes to identify unpaid contributions. It will allow the ATO to take compliance action more quickly, and improve the chances of recovering the unpaid super.

All businesses like to be paid on time by their customers. If the business next door is not paying their fair share, they have an unfair advantage relative to the business doing the right thing. This is not good for competitiveness.

The government listened to business concerns when it adopted the consultative group's recommendations for the 'expected date' approach to payslip reporting. The government worked closely with employer groups, including ACCI (the Australian Chamber of Commerce and Industry), in developing the legislation to minimise the impact on business.

In developing the regulations which will stand under this bill, we are taking a pragmatic approach, making it as easy as possible for employers to comply while still conveying essential information to their employees.

The measure has the public support of a range of industry groups, including ASFA (the Association of Superannuation Funds of Australia), AIST (the Australian Institute of Superannuation Trustees) and the ACTU.

Lastly, schedule 7 provides the commissioner with a legislative discretion to delay refunding an amount to a taxpayer, pending integrity checks of their claim.

These amendments are in response to the full Federal Court decision in Commissioner of Taxation v Multiflex Pty Ltd, that the commissioner is required to pay a GST refund within the time taken to process a taxpayer's return, and the commissioner has no additional time to check the validity of the claim, even in cases where the commissioner suspects it might be incorrect, including due to carelessness, recklessness or fraud.

The amendments seek to restore what had been the commissioner's administrative practice, before the Multiflex decision, of retaining certain amounts whilst undertaking refund integrity checks of a taxpayer's claim.

The changes seek to strike a balance between a taxpayer's right to receive a prompt refund and the commissioner's obligation to protect the integrity of the tax refund system. Following public consultation on the draft legislation, a number of changes were made to ensure the right balance is struck.

In particular, the amendments in schedule 7 only allow the commissioner to delay a refund claim if it is reasonable, and he must tell the taxpayer of that decision within 14 days (or 30 days, depending on the relevant tax) or otherwise pay the refund. Taxpayers will also be able to object where payment of the refund has been delayed for more than 60 days. These features provide taxpayers with more rights than previously available under the commissioner's administrative practice.

Full details of the measures in this bill are contained in the explanatory memorandum.

Debate adjourned.