Second Reading Speech
Mr Swan (Treasurer)I move:
That this bill be now read a second time.
The Rudd government is proud to be delivering in the 2009 budget a fair go for pensioners. This support for our pensioners is long overdue.
But we also had to make some tough decisions to ensure the pension and retirement income system is sustainable and affordable into the future.
We could not lift the base rate of the pension without making savings elsewhere in the budget.
In total, the measures in this bill provide budgetary savings of almost $5 billion over the forward estimates.
Schedule 1 will better target the current general exemption applying to foreign employment income of those who are Australian residents for income tax purposes.
It will enhance the fairness and integrity of the tax system by ensuring that Australian resident taxpayers who work in low-tax jurisdictions pay the same rate of Australian tax as individuals who work in Australia.
From 1 July 2009, an exemption will apply to income earned as an aid worker, a charitable worker or under certain types of government employment such as a defence or police deployment. It will also apply to income earned as prescribed under regulations. Foreign employment income relating to projects that are in the national interest will remain exempt under existing rules.
Other foreign employment income earned on or after 1 July 2009 will be subject to Australian income tax, unless exempt under another provision of the tax law. However, a non-refundable tax offset will be claimable for foreign income tax paid on that income.
This change is expected to provide an additional $675 million over the forward estimates.
To deliver necessary savings, the government will also temporarily reduce the government superannuation co-contribution for eligible contributions made between 1 July 2009 and 30 June 2014.
Schedule 2 to this bill implements a temporary reduction in the co-contribution matching rate to 100 per cent for eligible contributions.
The criteria to qualify for a co-contribution, including income eligibility thresholds, will remain unchanged.
The scheme will still provide a very generous incentive for those low- and middle-income earners to save towards their retirement.
These amendments deliver savings of around $1.4 billion over the forward estimates.
The Australia's future tax system review report into retirement incomes found that tax-assisted voluntary superannuation contributions should be more fairly distributed and that the current cap on the concessions should be reconsidered.
Schedule 3 to this bill implements the government's response to this finding, while making a long-term contribution to sustainable pension reform, by reducing the level of the concessional contributions caps from 2009-10.
The concessional superannuation caps provide generous tax concessions primarily to high-income earners. The caps will now be halved-from $50,000 to $25,000 for those under 50, and from $100,000 to $50,000 for those subject to the existing transitional cap until 30 June 2012 for those aged over 50.
It is estimated that only 1.8 per cent of individuals making contributions will be affected by this measure-and these are predominantly high-income earners.
This measure goes some way to reducing the disproportionate benefits to high-income earners who can afford to make large concessional contributions.
The caps remain generous, and other incentives to contribute to superannuation remain, including the concessional treatment of fund earnings and in retirement.
This measure will save around $2.8 billion over the forward estimates.
The budget measures in this bill are part of a strategy that will ensure that we can build a fair and sustainable retirement incomes system into the future.
Every self-funded retiree has an interest in a decent safety net, especially now.
And in tough times such as these the government has had to take the tough decisions to deliver this important reform.
Full details of these measures are contained in the explanatory memorandum to the bill.
Debate (on motion by Mr Haase) adjourned.
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