Report by Senator Lyn Allison
Australian Democrats
1. The Committee's Inquiry into the Superannuation Contributions Tax
Amendment Bills has been an extremely difficult process. Because of the
timeline imposed by the Government, the Australian Democrats believe that
the Committee has not been given sufficient time and sufficient evidence
to properly review the administrative problems of implementing the Higher
Income Earners Superannuation Tax Surcharge.
2. Evidence presented to the Committee by ASFA, Jacques Martin, Coopers
& Lybrand and others indicated that fund administrators and trustees
are having some serious difficulties in implementing the surcharge. Problems
identified included:
- Difficulty of persuading members to provide tax file numbers, with
just 23 per cent of members providing tax file numbers despite three
requests; [1]
- Costs of collecting information from the large number of people who
have exited the super system since August 1996 [2];
- New requirements in the amending bills suddenly made retrospective
to August 1996 [3];
- The near impossibility of the maybe 200 available actuaries in Australia
completing the work needed on 1500 defined benefits funds before the
December 15, 1997 deadline [4];
- Continuing confusion about the meaning of the requirements in the
act itself.
3. It must be remembered that the collective mechanism used for the tax
surcharge is not the one recommended by this Committee in its 23rd report.
The Committee, following the strong submissions from the superannuation
industry, employer groups, unions and ACOSS, recommended that the best
means of collecting the tax surcharge was direct from employees through
group certificates. [5]
4. The Government rejected that recommendation and insisted on a collection
mechanism through superannuation funds, despite concerns that this would
greatly add to the administrative costs of the funds and inadvertently
leave many workers paying the surcharge for failing to provide tax file
numbers.
5. The Government however, did signal a willingness to remain open to
proposals to modify any administrative problems which emerged in implementation
of the surcharge. The Treasurer made this commitment quite clear to me
in a meeting involving myself and the Leader of the Australian Democrats
prior to the Senate voting on the legislation. The legislation is now
six months old and the Government has brought forward its first set of
amendments to fix teething problems with the implementation of its legislation.
6. However, it is clear from the evidence presented to the Committee
that the amendments presented by the Government in its bill fall far short
of what is required to raise the legislation to its highest level of workability.
7. The Australian Democrats are strong supporters of the intent of the
Government in making sure that the excessive tax concessions available
to high income earners on superannuation be wound back. We are strong
supporters of the intent of the Tax Surcharge and always have been. But,
we want to see legislation which ensures that innocent workers are not
caught in its net, that the administration costs of the funds do not skyrocket
as a result and that the implementing legislation is sufficiently understandable
and workable to ensure that it engenders confidence in the underlying
policy.
8. On the evidence submitted to the Committee, and based on the paucity
of the responses provided to the Committee by the Government, the Australian
Democrats are not persuaded that the Government has done all that it could
have done to make this legislation workable with this package of bills.
In our view, more work is needed to properly respond to the problems identified
by industry and to ensure that compliance costs with what is a very complex
piece of tax legislation are minimised.
9. The following items in particular need to be addressed by Government.
The list is not exhaustive, but covers what we believe are the more significant
problems identified by the Committee in its evidence:
- The need for further education measures to minimise the prospect that
low income workers might be caught by the tax surcharge;
- The difficulty of requiring defined benefit funds to report by December
15 to the ATO with completed actuarial reports;
- The inconsistent treatment of different superannuation funds in enforcing
the Government intent that benefits will not be reduced by more than
15 per cent;
- The difficulties associated with the application of the surcharge
to allocated surplus funds, in particular, in its possibly inadvertent
extension to accumulation funds;
- The inconsistent treatment of eligible termination payments as to
whether they are paid out or rolled over in application of the surcharge;
- Complexity of reporting requirements to the Tax Office on trustees
beyond what is necessary for operation of the legislation;
- Clarifying who can make payments to offset surcharge debts;
- Unfair treatment where tax surcharge overpayments are made, in terms
of characterisation as an ETP and payment of interest;
- Possible overtaxation of partly vested benefits;
- Underestimation of the difficulties and time delays in obtaining the
actuarial reports necessary to implement the legislation, particularly
in the absence of practice guidelines from the Institute of Actuaries;
- Difficulties in obtaining the revenue from members who have left the
funds; and
- Failure by the drafters of the legislation to minimise compliance
costs for funds in the collection of the revenue.
10. The Australian Democrats believe that the Government needs to address
these issues and the other issues raised by industry representatives.
We believe industry is justified in many of the complaints that they have
made about the workability of the legislation as it stands, and share
industry's concern to see the legislation work better. We have been persuaded
that industry is simply trying to work with a piece of highly complex
and complicated legislation and to ensure that the costs to the members
of their funds are minimised.
11. We are conscious of the desire of the Government to have this legislation
in place prior to the December 15 deadline. We wish to signal quite clearly
that we are prepared to pass this legislation when we are satisfied that
the Government has properly dealt with the legitimate concerns about the
implementation of the Tax Surcharge raised with this Committee.
Australian Democrats recommendations:
That the reporting date for defined benefits funds for 1997 be deferred
from December 15, 1997 to March 1, 1998;
That the Senate defer consideration of these bills for three weeks
and require the Government to hold a further round of genuine consultations
with industry about the issues raised in this report with a clear commitment
to reduce the funds' costs of complying with the legislation;
That the Government appoint an independent expert to review the legislation
with a view to further reducing the compliance costs for the superannuation
industry consistent with protecting the revenue, and that the expert report
be tabled in both Houses of Parliament no later than June 30, 1998.
(signed)
Senator Lyn Allison
Footnotes
[1] Evidence, 28/10/97, S15.
[2] Evidence, 28/10/97, S29.
[3] Evidence, 28/10/97, S74.
[4] Evidence , 28/10/97, S54.
[5] 23rd Report, p.91.
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