VIRGINIA TRIOLI:
The Assistant Treasurer is going to talk about wanting to start a conversation, is how he’s going to phrase it, I understand, about changing the superannuation system to crackdown on loopholes – superannuation tax loopholes – for very wealthy Australians. There are a number of self managed super fund that is have a hell of a lot of money in them and they get to get away with a 15 per cent tax rate. That’s well below the top marginal income tax rate of 45 per cent, so potentially some big changes are in the offering. Stephen Jones is Assistant Treasurer and Minister for Financial Services and he joins you now. Minister, good morning.
STEPHEN JONES:
Good morning. Good to be with you.
TRIOLI:
Which of the tax concessions that you want to have a debate about?
JONES:
First, we want to have a discussion around the objectives of super. It’s unusual in any area of policy that you could have something in existence for over 30 years and there not be a national agreement or understanding of why we’re doing it, what’s the core objective. And unless you get that right, all the policy discussions around superannuation head off in the wrong direction. I happen to believe that, and I think the foundational purpose for superannuation was about retirement income and it is about retirement income. You’d have to say the existing tax settings aren’t right.
TRIOLI:
In what way? Go through that for us?
JONES:
Well, we’ve got a whole heap of extremely high balanced funds. There’s one fund, I think the largest fund’s got about $400 million in it. There’s about 30 funds that have got in excess of $100 million in them, lots of them in excess of $10 million in them. I don’t think anyone can seriously argue that a superannuation fund of $400 million is for retirement income. You could live for 100 years in retirement and not draw down on that balance. So, obviously, that money’s been placed in superannuation for tax concessions and for tax minimisation purposes. Now, I don’t blame somebody for doing that, it’s a rational decision if that’s the way the system is set up. But it’s not the purpose of the system, and what it means is the tax concessions are being paid to people who have still extraordinarily large balances in their super fund and that money’s not available for other purposes – for paying for pensions, for paying for healthcare, for paying for defence and other calls upon the budget.
TRIOLI:
So, you’re talking here about the existing rules which enable very wealthy people, people with more than $1.7 million in their super, to leave those excess funds in their account and they get that very generous concessional tax rate of 15 per cent, which, of course, is well below the top marginal rate. I think you’ve mentioned, you’re going to mention in your speech today about 32 of those self managed super funds you’re talking about that have so much money in them. So, we could pretty much name these 32 very wealthy Australians and say, “Stop using these funds as a way of ducking tax”.
JONES:
Well, actually, I don’t want the conversation necessarily to go in that direction. That’s why I’m saying, well, let’s just be up front and honest and open about why we’re doing super, and we’re not doing super to minimise tax. We’re not doing super for estate planning, and if there is a small but significant number of funds which have got these extraordinary balances in them, which obviously are distorting the system, then we’ve got to fix them up because I think it undermines confidence in the overall system and the effectiveness of the system, frankly.
TRIOLI:
It might not necessarily mean, though, that you get to recoup tax if you decide to take away that concessional rate and make taxation on those funds, put that at a higher rate, it just might mean that those wealthy Australians take that money and put it in a more tax advantageous place somewhere else.
JONES:
Well, that’s obviously something that could flow from this, which is why I’m saying we’ve got to start the conversation with what the objective is of superannuation, and, frankly, if the objective of superannuation is tax minimisation, then we’ve got a system which is pretty well set up to do that because it provides a 15 per cent extraordinarily generous tax concessional arrangement on super for a good reason, and that is to maximise retirement savings, but it’s being used for another purpose, then we we’ve got to have a look at that and we will. And if people are able to find some other way to invest their money, I think they’ll struggle to find somewhere where there’s as generous arrangements as superannuation, but, you know, that is their right to do that. It is their right to invest their money in accordance with the law. It’s our responsibility as a Government to ensure that the laws, and particularly the tax laws, are working as intended.
TRIOLI:
Do you think that this will turn into legislative change to the tax system that you’ll then have to get through, of course, the lower house but the upper house of Parliament as well - is that where we’re heading once we have this conversation, Minister?
JONES:
I think I don’t want to get the cart before the horse, and that’s why it’s incredibly important that we have the conversation ending in a legislative objective for superannuation, that everybody can say, “Well, okay, this is what superannuation is for.” As far as I’m concerned, as far as the Government is concerned, the purpose of superannuation is retirement income, so let’s then go back and measure the taxation arrangements and perhaps other arrangements to say: Are they meeting that purpose? Are they meeting that objective? If not, then we should look at it.
TRIOLI:
Stephen Jones is with you –
JONES:
Including – sorry to interrupt, and including legislation.
TRIOLI:
Yes, okay. Ultimately legislation and I guess we would have to if that’s where the conversation goes. Stephen Jones is with you, Assistant Treasurer and Minister for Financial Services. Minister, you may not be aware, but last week on this program we spoke to someone from Foodbank, the food charity, saying that a woman had come to them and was taking a pot of yogurt, was going to take home, and wanted to know how far after the expiry date she could use it because she hoped to keep it till Christmas so she could give it to her children as a treat. That’s the state of income disparity in this country when we’re talking about these incredibly wealthy individuals. You say this conversation needs to be framed in terms of what superannuation is really for. Doesn’t it also need to be framed about income disparity about very different taxation outcomes for Australians and how we need to have a national conversation about that?
JONES:
I agree, and I hear stories like the one you’ve told from my own electorate, and they break my heart, and for too many Australians the increased cost of living has come upon a situation where they were already struggling. So, we need to ensure the Government is working well for all Australians, including our tax system, including our income redistribution system, including our welfare and our income support system, and clearly for that person you were talking about, it’s not, and for a wealthy country we can do so much better.
TRIOLI:
And, so, that is top of mind for you, that this is about fixing a structural problem in the deficit and the fact that you simply need to be recouping more money? Do wealthy Australians need to be alerted this morning that this is a conversation, a reckoning, that’s coming?
JONES:
Look, I don’t want this to be pitching one group of Australians against another group of Australians, and it’s not finger pointing, and it’s not blame –
TRIOLI:
I’m just going to jump in there –
JONES:
And I know –
TRIOLI:
Can I just jump in there, Minister, just for a second, and, no, I agree with you not to make it a war, but there is a distinctly different experience in this country for wealthy Australians versus others?
JONES:
There is no doubt that we have inequality and if our tax system is exacerbating that inequality, if our superannuation laws, which are supposed to be about making retirement a dignified experience for all Australians, and if they’re not working to that end, then, of course, we’ve got to review it and, of course, we’ve got to look at it and ensure that it is, and if the tax arrangements are a part of that, then they’re something we should look at as well.
TRIOLI:
Just before I let you go, Stephen Jones, top of mind issue here on this program and, of course, nationally, the hacking scandals that are going on in against institutions left, right and centre. Are you in regular conversation with the banks about just what systems they have in place to protect all of our money and our savings from these continual hacks?
JONES:
I met with some of the banking representatives yesterday. I had a roundtable with them last week on exactly this issue: How do we protect the data that is in their trust and how do we ensure that we can protect Australians from scams and frauds? We announced yesterday that we’re setting up a new anti-scam centre in the ACCC. We’ll be working with the banks, with the telecommunications companies and the social media platforms and law enforcement, to ensure this problem, which is costing Australian households $2 billion a year, is addressed and addressed comprehensively, and that’s going to take a whole of government approach, working with banks, working with business as well. I’ve got to say at the moment, any single – any one of the large, big four banks will have more people working on scams and fraud protection than the whole of the Government, and that’s something that’s got to change as well. We need to lift the effort up in the Government. We need to work with the banks and the financial institutions and the telecommunications companies to fix this problem which is costing Australians billions.
TRIOLI:
So, this issue has been left for too long with the companies themselves rather than there being any stronger offering from the Government?
JONES:
I think that’s absolutely right. The Government has dropped the ball on this. We want to fix it, but when we’ve dug into it, we understand that the only way we can resolve this issue is if we work with banks, with telecommunications companies, with the entire business community to ensure that we are working together in a coordinated fashion, having the right sort of security in place, sharing information as and when it’s needed, moving quickly when a fraud’s out there in the system to knock it on the head, to ensure that banks have flags in place to protect customers, to ensure telecommunications companies are stopping the communications of these fraud communications, to get the social media platforms pulling down the advertisements for frauds. Everybody’s got to work together and if you leave one weakness in the system, that’s exactly the place the criminals will exploit.
TRIOLI:
Just very, very quickly, were you satisfied with what you were told by the banks at that roundtable in terms of the measures they’ve got in place?
JONES:
I’m satisfied that they understand the scale of the problem. I’m not satisfied that everybody is doing as much as we can and should be doing, and that’s got to start with cooperation.
TRIOLI:
Minister, really good to talk to you, this morning. Thank you so much.
JONES:
Great to be with you.