SOUTHERN STATE SUPERANNUATION BILL

Second Reading

Adjourned debate on second reading.

(Continued from 8 April 2009. Page 2337.)

Mr GRIFFITHS (Goyder) (17:04): I confirm that I will be the lead speaker on this bill. The opposition supports the bill, without the need for amendment to be considered in committee. This bill was introduced by the Treasurer on 8 April. I am grateful that Mr Deane Prior, Director, Superannuation Policy, Treasury and Finance, was available to give me a briefing some eight days ago. As usual when talking to Mr Prior, the briefing was detailed and he was very knowledgeable.

As I understand it, the intention of the bill is to take away a lot of the detail included in the Southern State Superannuation Act 1994 in order to create a simplified act of parliament to control the superannuation scheme and put much of the detail (which is occasionally required to be amended) into regulations. I asked a question during the briefing about the availability of the draft regulations. I am somewhat concerned about the intent of some legislation that comes before the chamber to take issues out of the act and put them into regulations which are not necessarily subject to the same degree of scrutiny before they become law.

While I recognise that there is an opportunity to consider the regulations through another process, an indication was given to me during the briefing that the draft regulations would be available because they had been given to groups with whom the government consulted on the bill. But they have not been given to me, so I formally put on the record that I seek provision of the regulations in order to allow scrutiny by the opposition between the houses to ensure that, when the bill progresses through the upper house, we have an opportunity to consider what is contained within them.

My review of the second reading explanation and the clauses and my understanding of the superannuation scheme which applies to these employees is that it is an accumulation scheme. Therefore, it is fully funded superannuation, not subject to other members who are part of the defined benefit scheme, which has an unfunded liability. The very strong emphasis in the second reading explanation that the benefits to public sector employees who are part of this scheme will not be affected in any way gives me assurance that the intent of the bill is appropriate.

When seeking confirmation from the South Australian Superannuation Board about what it thought of the bill, a very strong commitment was given that it has been driven by the board to some degree, that its members fully support the bill, and that they seek support from the opposition.

The bill aims to modernise and simplify the legislation and provide flexibility for changes to occur quickly in the future by reducing the scope of the act but increasing the use of regulations. As part of the briefing it was pointed out to me that, because many changes are made within the federal sphere in relation to superannuation, by the time they can be considered by the individual states and incorporated into state legislation there is a delay; so by simplifying the legislation, inserting only the core principles required for superannuation management into the bill and putting the majority of the issues that require flexibility into the regulations, it would allow the changes to be made quickly and ensure that members of the scheme get the greatest benefit as quickly as possible. Certainly, from the opposition's perspective, there is no reason for us to hold it up, and in our party room debate there was unanimous support for the bill in its current form.

I note that the Triple S scheme is an accumulation scheme available to persons employed in the public sector and that the changes that will become part of the management of the scheme, through the introduction and support for this bill, allow for approved employers to pay employee superannuation into the scheme. A question was put to me, and an example was provided at the briefing, about approved employees, who may be people such as those engaged by the education department to undertake Vacswim programs and who are not permanent employees of the department or the Crown.

They may have a variety of other roles in the community, and their role in the VACSWIM programs is very much part time for a few months of the year. While the government has a liability to pay superannuation for them, I understand that, traditionally, they have not been caught up within this super scheme. I am not sure where their super money has gone, because the government, as the employer, has a liability of 9 per cent it is required to pay. Opening up the membership opportunity via these amendments promotes what the Triple S scheme is about.

Certainly, in his briefing with me, Mr Prior talked about the fact that it is one of the low cost management schemes that are available. In doing some comparative work on this scheme and others, I know that that is a very valid and factual statement. While many super schemes in the marketplace may seem attractive, they have quite considerable management costs; however, for a very reasonable fee (I believe it is less than $1 per week), this scheme provides management of what is in many cases a person's largest investment opportunity beyond their home, and that is why I think security really needs to be provided.

All of us in this chamber, and most people who have some understanding of what has been occurring around the world in the past 16 months, appreciate that all our superannuation investments have been hit to some degree. People who have chosen more conservative arms of investment have not been hit to such a large extent because their investment options have been slightly more preserved from the great fluctuations that have occurred in returns on property and investment of assets.

However, those who have taken higher risk options in superannuation, such as many of those of a younger age who think that it will be a long time before they need their superannuation and that they can afford to accept some level of risk—that is, the possibility of one period of negative return over a five to seven year period, with the possibility of greater returns—have been severely affected. That is why it is particularly pleasing that this scheme and the proposed changes do not diminish any of the benefits payable upon their retirement or their leaving the employer and transferring their super, if they so choose. It makes sure that people have their asset.

As part of the briefing, Mr Prior provided the valuation of the funds held within the scheme, and it is important to note the way they are managed at the moment. Two funds are held: one comprises the employee contributions and the earnings of those investments, and that total is held in a sum; the other fund is the value of the employer contributions and the investments. I do not quite understand why they have been separated in the past, but the intention now is to consolidate them into one investment fund, and that is again a simplification of the process.

It is interesting that as at 30 June 2008 $5.9 billion was being held in those two funds. Again, there have been some considerable drops in the value of investments since that time, and I am sure that we will get an update on their value as they currently stand. Sadly, it will be much less than $5.9 billion, and every dollar lost is a dollar out of somebody's pocket to help fund their retirement option.

At the briefing, I noted that, as at 31 December, the Triple S scheme holds 161,560 member accounts, which includes 55,400 preserved member accounts. That is a very large number when you consider that South Australia has some 780,000 people in work and, for 161,000 of those to hold funds within the Triple S scheme, it really identifies that a lot of people who work or who have worked in the Public Service have chosen to invest their funds through superannuation; indeed, in many cases they may have left them in the scheme, a fact that is highlighted by the preserved member accounts, that is, those who are no longer employees but who have chosen to leave their dollars with the Triple S scheme.

As at 31 December 2009, about 9,500 people had chosen a specific investment strategy other than the default option, which is usually the balanced fund. That is actually quite a good number, and it represents 6 or 7 per cent. In indications previously provided to me, Mr Prior talked about a much lower percentage of those who had made a conscious decision to determine their superannuation investment program. Most people are quite bamboozled about the options available to them and choose the default option because they think that, if somebody else within the industry has determined that that is the best form of investment, it is the easiest one to pursue.

In conclusion, simplification seems a reasonable option because it provides flexibility for changes to be made quickly. In his summing up, I ask the minister to give a commitment to provide me with a copy of the draft regulations so that I can ensure that they are considered by the opposition between the houses. I look forward to the steady progress of the bill through the chamber.

Mr PEDERICK (Hammond) (17:14): I rise, too, in support of the bill, which was introduced into this house on 8 April 2009 by the Hon. Tom Koutsantonis on behalf of Treasurer Kevin Foley. The bill will create an act to continue the Triple S contributory superannuation scheme for persons employed in the public sector. It will also make consequential amendments to certain other acts and repeal the Southern State Superannuation Act 1994. Consultation on our side of the house has advised that the bill proposes the replacement of the existing statute that establishes the Triple S scheme with a new act that will continue the scheme. The Triple S scheme is not being changed under this legislation.

The bill's target aim is to modernise and simplify the legislation and provide flexibility for changes to occur quickly in the future by reducing the scope of the act, but increasing the use of regulations. As mentioned by the member for Goyder, this seems quite reasonable, so as to ensure that changes can be implemented quickly in order to meet new industry standards and commonwealth requirements. I note that the member for Goyder has asked for a copy of the draft regulations so that we can see how that will be implemented.

Importantly, assurances have been given that the regulations may not reduce the amount of a person's accrued benefits. The Triple S scheme is an accumulation scheme available to persons employed in the public sector. However, changes will be made to allow for approved employers to pay employee superannuation into the scheme. For example, government funded programs such as VACSWIM will be able to utilise Triple S rather than using non-government superannuation schemes, which have higher management costs.

As at 30 June 2008, the Southern State Superannuation Scheme held $5.9 billion in two funds, one being employee contributions, funds rolled over from other schemes and earnings, and the other being employer contributions and earnings. Under the bill this money will be held in the one fund, the Southern State Superannuation Fund.

The number of member accounts in Triple S as at 31 December 2008 was 161,560, and this included 55,400 preserved member accounts. In relation to the number of members who have selected a specific investment strategy, other than the default balanced option, as at the end of December 2008 there was about 9 per cent of the membership who took up that option.

From our briefings on this bill, it seems as though it will simplify the scheme and put it in far better order. So long as the regulations are in place, it will be a benefit for everyone involved in this with their superannuation. Superannuation funds have certainly had their battles over recent times with the global financial crisis and we can only hope that things, as far as an earning capacity, recover shortly. With those few words I support the bill.

Mr GOLDSWORTHY (Kavel) (17:18): I, too, am pleased to make a contribution this afternoon in the house on the Southern State Superannuation Bill 2009. Along with my colleagues on this side of the house, I also wish to acknowledge my support for this particular piece of legislation.

I do not necessarily need to go into the finite technicalities of the legislation, given the fact that the shadow minister for finance has done that extremely well, as is his norm. However, there are a couple of points that I would like to make specifically in relation to the bill. If I could have the indulgence of the house, I would like to expand and broaden my comments concerning superannuation in general.

The bill aims to modernise and simplify the legislation and provide flexibility for changes to occur quickly in the future by reducing the scope of the act but increasing the use of regulations. I refer to the minister's second reading explanation that he made a couple of weeks ago. That was the Minister for Correctional Services and the then minister for road safety—however, we know that that is all changed now. However, I do not want to dwell on issues such as that. There are some points that the minister covered that I think are worthy of looking at again. I will quote from his speech:

With superannuation rules and standards constantly changing, often to meet commonwealth requirements, this restructuring of the enabling legislation will enable much quicker responses to required changes to scheme rules. Often changes to scheme rules need to be implemented at relatively short notice in order to meet new industry standards or commonwealth requirements. Being able to change scheme rules quickly is often necessary to prevent inconvenience to members and prevent them from being disadvantaged by necessary changes to rules being delayed.

That all makes perfect sense. As the member for Hammond pointed out, the Triple S scheme is an accumulation scheme available to persons employed in the public sector. However, changes will be made to allow for approved employers to pay employees' superannuation into the scheme. The member for Hammond quite correctly pointed out that government funded programs, such as VACSWIM, will be able to utilise the Triple S scheme, rather than using a non-government super scheme which has high management fees.

I can advise the house that I have a small amount of money in the Triple S scheme, having been a staffer.

The Hon. J.W. Weatherill: A bit smaller now.

Mr GOLDSWORTHY: Yes, indeed. I received a statement the other day, minister, and it was not particularly pleasant reading. Having been a staffer for a number of years before coming into this place, there were some contributions made into the Triple S scheme. Obviously there would be a number of members in this place, also being staffers in a previous career, who would have funds held in this scheme.

I will talk about superannuation in a broader sense. Superannuation is a very important part of financial planning, particularly as people leave full-time employment and move into semi-retirement or retirement. The superannuation guarantee was introduced, I think, under the previous Keating federal government and it was quite controversial when it was introduced. I must admit that, at the time, I had some reservations about it. However, as we have progressed as a society, as the country has progressed economically and markets have changed and aspects concerning financial management, the management of funds within the country, the deregulation of the markets and the like, deregulation of the banking system and so on, it has really brought about superannuation being part of the landscape.

If you do not have superannuation in one form or another, you will be at a disadvantage. I am fairly confident in saying that you would be at a disadvantage when you move into retirement. Really, the superannuation guarantee, while it was resisted a number of years ago during the Keating administration, I think has really been accepted as part of the landscape.

Superannuation is a vitally important part of financial planning. However, we have seen, in recent times, with the sharemarket crash and the global financial crisis (GFC), that that has had a significant effect on some superannuation schemes and also, obviously, with funds that are held in self-funded retiree situations.

With the sharemarket crash and the general effect of the GFC, the returns on the investments of the self-funded retirees have reduced and, unfortunately, those people have found themselves having to avail themselves of a part, if not all, of the old age pension in particular. Obviously, with people moving from a self-reliant scheme, where they are relying on their own funds to manage through retirement, they are going onto social security, basically, and availing themselves of the old age pension, and that is obviously placing more pressure on the government coffers.

I am not necessarily moving away from the relevance of the bill, but I make the comparison in relation to land tax. Land tax is having an impact on the net income of some self-funded retirees and having an impact, you could say, on their superannuation because property could be held within their superannuation portfolio. Obviously, with the enormous increases that we have seen in land tax over the past three years, that is having a negative impact on the bottom line for some of these people and, therefore, they have to avail themselves of the pension.

This was highlighted at a recent public meeting at the Norwood Town Hall, which was attended by 1,000-plus people and which I attended with my colleagues and the leader. This specific issue was highlighted from the floor at that meeting. People are having to look at going onto the pension because land tax is having a significant negative effect on their earnings. That is a very important point to make: that land tax is having an effect on superannuation funds.

Obviously, managed superannuation funds invest in a range of properties, commercial properties and, I would presume, residential properties as part of a portfolio mix. Land tax would obviously be charged on those properties and, again, would have an effect on managed superannuation funds. This particular tax is extremely pervasive; it covers a wide range of areas within our economy. Obviously, it affects business, but it also affects self-funded retirees and superannuation funds. I am pleased to speak to the bill and, as stated earlier, I intend to support it.

Mr PISONI (Unley) (17:27): As other speakers before me have indicated, we support this bill and we certainly understand and appreciate the importance of superannuation, not just for those on the public payroll, of course, but for all members of our community.

Superannuation has been part of the Australian way of life for all wage earners for the best part of 20 years now—or even longer than that. It would be closer to 25 years when compulsory superannuation contributions by employers were introduced. I think the initial start-up was about 5 per cent and it gradually went up to the 9 per cent that it is now. Of course, in the Commonwealth Public Service it is about 15.4 per cent, and there are different companies around the country that offer different types of superannuation packages.

Some chief executives in the state Public Service, for example, choose to salary sacrifice rather large amounts of their $330,000-odd salaries into superannuation. Obviously, they understand the importance of providing for themselves in their retirement. In a report that is tabled annually I think I have seen some chief executives stashing away $100,000 or more a year in salary sacrifice for superannuation. They obviously understand the importance of providing for their future.

Of course, every member of either the public or private sector who has a superannuation account will have noticed how difficult it has been over the past year, in particular—and even prior to that—to maintain growth in superannuation accounts. I know that in my case, once I was elected to parliament, we made a family decision that my wife would be a full-time carer. So, she has a stagnant superannuation account, and we cringe every time the account comes in, because it gets smaller and smaller as no contributions are being made to that account. I think that, at the moment, the Superannuation Act at the federal level does not provide for women as well as it could. I think there needs to be more flexibility for women in particular, or for any sole or primary carer who makes the decision to be a full-time carer and suspend their earning capacity.

I hope this is an area that will be addressed some time in the future so that women really do have a choice as to whether they want to stay in the workforce or be a full-time parent—or men, for that matter; caring for children is not exclusive to women. However, I think it is a fact—and it is silly to deny it—that the vast majority of primary carers of children are, in fact, women. Certainly, it is for that reason that I believe some changes at the federal level would go a long way to preserving women's superannuation entitlements and their nest eggs while they are not working. While people are not contributing to those accounts, maybe there should be somewhere they could park it so that they are not as vulnerable to market forces.

I pick up on the point that the member for Kavel made in his speech about the impact of land tax on superannuation. I think he made an interesting point. Property trusts are a big part of superannuation portfolios and, of course, properties are in fact subject to land tax. We know that, in South Australia, we have the worst land tax regime in the country, so we see investments being made outside of South Australia—in other states. We know of South Australians who have invested in other states. Our very own Treasurer has invested in real estate in Sydney. So, the rate of land tax and the effect that it is having on investments are of concern for many South Australians.

I want to relate a story that Rachel Sanderson—the Liberal candidate for the seat of Adelaide—told me when we attended at the Adelaide Parklands Preservation Association AGM on the weekend. Currently, she rents some space in the Qantas building just across the road, but that is no longer convenient. It is getting very difficult for her clients, her models, and so forth—she runs a very successful modelling agency that she started from scratch—to find parking when coming to see her to inquire about their portfolios and the work available to them. So, she is looking to move. She wants to stay within the city of Adelaide.

She told me about a property for lease in Melbourne Street, North Adelaide. The interesting scenario there was that the rent being asked by the landlord was $55,000 for only a small office. Rachel does not have a big business; only a handful of people in the business need office space. The rent being asked was $55,000 and Rachel, being the shrewd businesswoman that she is, said, 'I think I'll need to squeeze you a bit on that; that's an awful lot of money—over $1,000 a week—to lease this property.' The landlord said, 'I've got no choice. Here's my land tax bill.' The land tax bill from Revenue SA for the property she was looking at renting in North Adelaide was $35,000.

On top of that, the landlord has his council rates and insurance, of course. The only way the landlord could hope to make any money and try to earn some income from that property was to charge what Rachel and many others perceived, because it had been empty for a while, an above market rate. Of course, that runs right across investment portfolios that have property trusts and investments in South Australia.

We know that property trusts are a great way to get investment moving and capital expenditure happening in a state. If a state has favourable property taxes, property trusts take that into account when they are working out their prospectuses and when they are out looking for investors. They approach superannuation funds to fund those developments, whether they be commercial, semi-commercial or developments that combine retail, service and residential.

For a city like Adelaide, for example, it would be great if we could increase the density of those living in the square mile. We could reduce the number of people using our roads; we could encourage people to use public transport or walk. Wouldn't it be great to have a lot of younger couples moving into the city in the five or six years that many of them spend together prior to planning a family? They could live in the city of Adelaide, develop their careers and put some money away so that they could then put it towards a family home when the time comes.

Superannuation is a very important part of the South Australian psyche. I think it is very interesting that, in a period of about 20-odd years, we have seen Australia go from a country of very conservative investors, where investment in shares and property was seen as being for the elite, or for a very small part of the community. Through a series of privatisations of government assets, which started with the Keating years, with Qantas, Australian Airlines, through to the Telstra sell-off of the Howard years, we have seen more and more Australians participate in buying shares.

Australia is now, per capita, one of the largest holders of shares in the world, so, everybody has an interest in what is happening in the economy. They are much more interested in the effects of government management, for example, the effects of trade and management of companies, because they are investing their own money. They have a personal stake in how their money is invested, whether they invest it themselves through their self managed superannuation funds or whether they are investing with surplus funds using their computer in their home office and reading the papers every day and making their own decisions, or investing through share brokers or stockbrokers or getting advice from investment advisers, people are now a lot more aware about what is happening in the commercial world.

I think people are much more aware and, I think, it is fair to say, about how money is made and lost, and that is a good thing for Australia in the long term. I think it helps to keep governments responsible that people are aware of the implications of government decisions on their own investments.

We are obviously supporting this, as we see it as an improvement and a simplification of the system. We know that there has been consultation on this issue, so, obviously, we are happy to support the bill.

The Hon. K.O. FOLEY (Port Adelaide—Deputy Premier, Treasurer, Minister for Industry and Trade, Minister for Federal/State Relations) (17:40): I thank members opposite for supporting the bill. The member for Unley gave us a fairly rambling contribution. I am not sure what the fixation is on my investment property in Sydney as it relates to land tax. I would hope that the member is not suggesting that there is anything improper in me owning an apartment in Sydney.

The Hon. G.M. Gunn: It's your right.

The Hon. K.O. FOLEY: Yes—unfortunately, because it has been a dog of an investment. I will let others make the comment, but I think the member for Unley has more issues on his plate to worry about than what my investment properties may be, given his involvement in what today will turn out to be a very embarrassing question time for the state opposition.

Mr Pisoni: How?

The Hon. K.O. FOLEY: Just wait and see.

Mr Pisoni: Give details.

The SPEAKER: Order!

Mr Pisoni: You're a coward.

The SPEAKER: Order!

Mr Pisoni: You don't have details.

The SPEAKER: Order, the member for Unley!

The Hon. K.O. FOLEY: I think you will find the ALP state director is now advising the media that the documentation you have referred to, member for Unley, is, in fact, a fraud, is not ALP documentation at all. But, that is for the State Secretary of the Labor Party to handle. So if you are searching and I am 'Mr Coward', I think you've got some explaining to do.

Mr Pisoni interjecting:

The SPEAKER: The member for Unley will come to order!

Mr Pisoni interjecting:

The SPEAKER: The member for Unley, I have called you to order! I don't like being ignored. The Deputy Premier.

The Hon. K.O. FOLEY: He's a nasty man, that member for Unley, isn't he? A very nasty man. He is a very nasty man, involved in a very embarrassing incident today that I think will haunt the opposition leader for many days to come, if not many months to come. We have nothing more to say on the bill.

Bill read a second time and taken through its remaining stages.

The Hon. K.O. FOLEY: Mr Speaker, I draw your attention to the state of the house.

A quorum having been formed: