CHAPTER 6
Discussion with experts could have allowed the government's objectives
to be achieved in a more simple manner.[1]
Prelude
6.1 The Committee fully supports the principles behind the preservation
of superannuation entitlements for retirement income purposes. The Committee's
views on preservation were outlined in Chapter 2.
6.2 Following the receipt of so much evidence critical of the Government's
changes to the application of Super Guarantee (SG) to holders of business
class visas, the Committee approached the Assistant Treasurer seeking
details of the situation of Australians who temporarily reside in certain
countries which are our major trading partners. The Assistant Treasurer
responded in the following terms. While scheme details vary between
countries, payroll-based social security taxes are levied which, among
other things, provide employees with pension benefits in retirement. As
the size of the pension benefit depends on the level of lifetime contributions,
and 'contributions' are compulsory (including for Australians who are
temporarily resident overseas), these schemes are taken to be broadly
equivalent to our Superannuation Guarantee.
Generally, such contributions are non-refundable and benefits are
non-transferable. Further, most countries have a minimum contribution
period before any entitlement to a pension benefit arises. Thus, Australians
who temporarily reside in the countries under consideration are generally
not entitled to a refund of their contributions either on permanent departure
or retirement. ...
- Australians temporarily employed in the US derive no benefit from
their contributions unless they remain in the US for at least 10 years.
- Australians temporarily employed in Japan nearly always forfeit
at least some and potentially a large share of their direct contributions.
Contributions made after three years in Japan are non-refundable.
- Until April 1985 Japan allowed foreigners a full refund on departure.
This was replaced by a "no refund" policy for all contributors.
This changed to the current arrangements in late 1994.[2]
6.3 The Committee also questioned whether the tightening of the early
release of benefit rules would assist Australia's negotiating position
in bilateral social security agreements, in particular with the United
States. The Minister replied as follows. I understand the United States
has indicated to the Department of Social Security that unilateral refunds
of contributions or exemptions on Australia's part are an obstacle to
an agreement. It is embedded in US social security law that US agreements
must operate to prevent double contributions. If double contributions
are not an issue, the US is not required to avoid double contributions
and therefore has no need for an agreement.3
6.4 The Committee understands that most other countries have a system
where superannuation is included as part of government's taxation regime,
similar in character to Australia's Medicare system for example. In Australia,
superannuation under SG is paid into personal accounts for the benefit
of individuals and protected by the principles of the law of trusts. Accordingly,
Australia's scheme is different in both concept and in practice.
6.5 Recommendations on the three areas of the broader reference follow.
The original reference on the SHAR Bill is considered separately in the
following chapter.
Recommendation 6.1
The Committee supports the abolition of the $500 threshold but recommends
the Government substitutes a lower threshold of $200.
Senator Lyn Allison does not support this recommendation. The Australian
Democrats are not persuaded that low income workers are better off being
required to hold such small amounts in superannuation funds and will reserve
their position on this matter.
Recommendation 6.2
In relation to Australian citizens or permanent residents departing overseas
for whatever period, the Committee recommends retaining the Government's
change for the release of superannuation benefits only after such persons
have reached preservation age.
To this recommendation the Labor and Democrat Senators add the following:
There should be a reasonable transition period of six months from the
date of operation of the revised regulations to allow those people who
were leaving Australia to notify their superannuation fund of their intention.
The transition period for people notifying their superannuation fund
should end on 30 December 1997 and will only apply to those people who
are planning on leaving Australia before 30 December 1998.
Recommendation 6.3
For temporary residents in Australia holding temporary visas, Labor and
Democrat Senators recommend that, on their permanent departure overseas,
these visa holders be granted full access to all preserved superannuation
benefits.
The Coalition Senators acknowledge that the evidence received during
the inquiry overwhelmingly supports the position that temporary residents
in Australia holding temporary visas be granted full access to all preserved
superannuation benefits on their permanent departure overseas.
However, the Coalition Senators note the continued unfavourable treatment
of Australians employed overseas in respect of social security taxes in
countries such as the United States, as described in the Assistant Treasurer's
letter. The Coalition Senators consider that if the Government agreed
to grant full access to all preserved benefits for temporary residents
at this time, this may unduly weaken its position in respect of the social
security agreement negotiations yet to be concluded.
The Coalition Senators believe that, in the longer term, holders of 456,
457 and 411 visas should be granted access to their superannuation on
permanent departure. Such access should occur as social security agreements
are concluded. The Coalition Senators express their concern at the slow
rate of making these agreements, and the lack of understanding of the
differences between Australia's superannuation system and that of other
countries.
Recommendation 6.4
The Committee recommends that there be no exemption beyond those already
granted from the application of the Super Guarantee for temporary residents.
Recommendation 6.5
The Committee recommends that the following changes be made to the Government's
new test for severe financial hardship:
(c) a subjective test be added, being the total inability to meet reasonable
and immediate family living expenses.
Labor Senators conclude that a reasonable waiting period in continuous
receipt of income support needed to satisfy the objective test for severe
financial hardship should be twelve weeks.
Recommendation 6.6
The Committee recommends that the Insurance and Superannuation Commission
be the appropriate body to assess claims on grounds of severe financial
hardship.
Recommendation 6.7
The Committee recommends that the criteria designated under the compassionate
grounds provisions be expanded to include a residual discretion for the
Insurance and Superannuation Commissioner to release benefits, other than
in accordance with the listed criteria, where such serious and special
circumstances exist as to justify compassionate consideration.
[1] Evidence, Mr Ward, Manager
Research and Information, William M. Mercer Pty Ltd, p. 3.
[2] Letter to the Chair from the
Assistant Treasurer, 3 September 1997.
3 ibid
Top
|