Interview with Jon Faine, 774

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JON FAINE:

Kelly O’Dwyer is the Minister for Revenue and Financial Services in the Turnbull Coalition Government. She’s the Member of Higgins in eastern suburban Melbourne. Ms O’Dwyer, good morning to you.

KELLY O’DWYER:

Good morning to you Jon and your listeners.

JON FAINE:

What do you want to achieve with this particular set of recommendations from the Productivity Commission?

KELLY O’DWYER:

Well the first point to note is that this is an independent review conducted by the Productivity Commission. It is a draft review. It is not a review that has been done by the Government but some broad recommendations being made to the Government.

JON FAINE:

And you set the terms of reference. So they’re doing what you want. So…

KELLY O’DWYER:

We set the terms of reference and I’ll explain why we set the terms of reference. Shortly after coming into government, Jon, we did a health check on our financial system to make sure that we had a strong financial system. What it found was one of the key recommendations that needed to be looked at more closely and scrutinised more closely with our superannuation system. It’s gone from a system that used to be worth around a couple of hundred million dollars when the superannuation guarantee was first legislated, to now being an industry worth more than $2 trillion. So it is absolutely critical to our economy and it’s critical to the retirement incomes of millions and millions of Australians.

JON FAINE:

So what do you want to achieve?

KELLY O’DWYER:

So what we want to achieve is we want to make sure that it gives the best possible outcomes for members. That it is a competitive system, it’s efficient and it means that people are getting the returns that they need in order to live the best possible lives that they can in retirement.

JON FAINE:

And you want to save the welfare budget from having to support people by having a more efficient super system, I understand that. But you also have an ideological set against the trade union funds, do you not?

KELLY O’DWYER:

Well no, that’s not true at all. I mean this review is actually looking at all super funds, whether they be corporate funds, retail funds or industry super funds. And what they’ve found is right across the industry with the current default fund settings, it means that there are people who have got multiple funds, which means multiple sets of administrative fees. It means that often they are paying multiple insurance premiums and generally speaking they can only ever claim on one which means that they are eroding their retirement income by thousands and thousands of dollars. In fact the Productivity Commission has found that one of the most egregious failings in our system at the moment is the proliferation of these default funds which can reduce a retiree’s balance by around about $25,000 on average. Now that’s not insignificant.

JON FAINE:

Well it’s also, $25,000 in the context of retirement savings is a very small part of an overall problem. We’ve got more competition than we’ve ever had before. Surely if people are careless or reckless about their own money, well that’s their problem.

KELLY O’DWYER:

But this is the problem Jon is that people are not careless or reckless about their own money. People are usually very, very careful with their own money. We have got a mandated system here. We force people to save money, to defer their wages so that it can be there for them in retirement.

JON FAINE:

But there’s nothing to stop you consolidating small balances, you can choose which fund you want to put them all in and if you’ve got different default funds from a legacy of different work then you can bounce them all into one now.

KELLY O’DWYER:

Let me finish on this point. You say that people can make choices about their fund. Well actually they can’t still in today’s superannuation system make choices about where their money goes and I’ll give you an example –

JON FAINE:

You can in fact.

KELLY O’DWYER:

Well no you, no well let me give you the example Jon. So for instance if you’re covered by an enterprise bargaining agreement or if you’re covered by a workplace determination and there are round about two million Australians, Jon, who are covered under these different schemes. You don’t have choice over where you put your money. You are mandated to put money into that particular fund that is chosen for you. Now we have seen evidence given in the Trade Union Royal Commission where an employee actually, because of his family circumstances he had a child who had special needs, he wanted to put it into a different fund because he thought that that would be better for him and for his family’s circumstances. He wasn’t allowed to do it. We have already got legislation that has been drafted that would actually change that to allow people to make choices about where their money goes.

JON FAINE:

But that’s nothing to do with the Productivity Commission. That’s to do with just improving the flexibility for individuals. I don’t know the circumstances of the example you’re talking about – it seems quite atypical to me. It’s a simple matter of just writing a letter to a fund saying transfer my balance to this particular one. I’ve done it myself.

KELLY O’DWYER:

No it isn’t Jon, that’s the point. No, no, it isn’t and that’s the point Jon. You can’t under the existing system. And you’re right, it’s different to the default fund points that we’re talking about. It is broadly a question of choice. And it’s allowing people who are covered by enterprise bargaining agreements and workplace determinations to choose where their money goes. We think that that’s a fundamental right that people should be allowed to choose. It’s their savings after all. They should be able to if they want to choose to put it into a different fund they should be able to make that choice.

JON FAINE:

A moment ago you said that people ought be able to make a choice but at the same time you’re wanting to tighten the rules and mandate it. So which way are you going? Are you going for tighter regulation or are you going to deregulate?

KELLY O’DWYER:

Well no, the options that have been presented on default funds are simply that. They are options that are currently being discussed by the –

JON FAINE:

Which ones do you prefer though Minister?

KELLY O’DWYER:

Well I’m not going to pre-empt the final report that is made by the Productivity Commission.

JON FAINE:

Well here’s a government that’s all about supposedly removing what’s called red tape. Sometimes in fact it’s public interest regulation. But which way do you want to go? Do you want to more tightly prescribe what happens or do you want to let the market decide?

KELLY O’DWYER:

Well what we want to do is we actually want to hear from people who are going to be affected and this is why the Productivity Commission has released their draft report. They want to engage people who clearly these days have different work arrangements to the arrangements that were in place 20 or 30-odd years ago. We’ve got a very mobile and flexible workplace and we’ve got a lot of young people who obviously are coming into the superannuation system and they’re paying multiple sets of fees. We want a system that works for people and we make no apologies about wanting to put people first. Not the funds themselves, not the vested interest, but we want people to be put first in this.

JON FAINE:

The biggest issue surely in superannuation is non-payment, the fact that there are so many employers who just regard it as something that they don’t comply with unless they have to. There’s less regulation than ever. The Tax Office has shed thousands of staff. There’s less follow up than there used to be and next to no auditing.

KELLY O’DWYER:

Well Jon, it is against the law for employers not to pay the superannuation guarantee entitlements of employees. It is against the law as it stands today. The Australian Taxation –

JON FAINE:

A law that’s not enforced, Minister, is a law not worth having.

KELLY O’DWYER:

Well no that’s not true. Well, that is a true statement if you don’t enforce the law then there is an issue. But the Australian Taxation Office routinely follows up on complaints that are made when people have not been paid their correct employee entitlements. Can the system be improved? We are always looking at ways that we can improve the system and the Government has on foot already an inter-departmental working group that is looking at how we can enhance the measures that exist today to make sure that there are even greater protections going forward.

JON FAINE:

We will wait then with great interest to see exactly what happens with the Productivity Commission’s recommendations. But certainly anything that makes the system more competitive and work in the interests of the account holders is a good thing. Minister, I also noticed that yesterday the Treasury, your colleague Scott Morrison, announced to the Parliament what’s called the Google Tax or the Diverted Profits Tax –

KELLY O’DWYER:

Yes, I think we refer it to as the Diverted Profits Tax, but I know that those of you in the press like to refer to it as the Google Tax.

JON FAINE:

Well the public understand much more easily a tax that’s supposed to collect some revenue from transnational corporations that seem to regard locating any of their profits in a taxable jurisdiction is an incredible inconvenience to them. But the Financial Review today reports that as many as a hundred local operations of multinational corporations are already restructuring their affairs to avoid the new Diverted Profits Tax. So is this a game of cat and mouse between the Government and transnational corporations?

KELLY O’DWYER:

Well in fact it will be incredibly difficult for multinationals to structure both against and around our Diverted Profits Tax and also the Multinational Anti-Avoidance Law that has already been put in place and is already going to see the Tax Office raise more than $2 billion worth of assessments against multinational companies over the next coming weeks. Because we have put this in place we have now got some of the toughest tax laws in the world on multinationals. The reason we have done this is because we believe it’s critical that we have integrity in our tax system and that we collect every tax dollar that is owed to the Australian people. Because ultimately that money gets spent on infrastructure, it gets spent on services, it gets spent on defence and all of the other things that people expect and demand of government.

JON FAINE:

Understood, and all of that is very important, but not answering the actual question I put to you. The Financial Review today reports that already 100 local operations of transnational corporations are restructuring their affairs.

KELLY O’DWYER:

Well you can’t restructure around our anti-avoidance mechanisms. You simply can’t do that. The Tax Office already has got audits on foot with these multinational companies. They’ve got people embedded in these multinational companies going through the books as we speak. And as I said there are going to be between six and seven cases over the next seven or so weeks that will be announced, that will see tax assessments raised in excess of $2 billion.

JON FAINE:

Well, we will see when the budget figures are eventually delivered, not just now but when this tax has come into effect, whether those $2 billion in fact do make it into government coffers. Thank you indeed for your answers to all my questions this morning. One final one if I may, when’s your next baby due?

KELLY O’DWYER:

In about three weeks’ time. In about three weeks. So I’ll have two babies under two.

JON FAINE:

And I think last time you took about five minutes leave from the Parliament.

KELLY O’DWYER:

It wasn’t a long period of time but I’ve got a very fabulous husband and a very supportive family and obviously I’ve got a great parliamentary team that’s also very supportive as well.

JON FAINE:

And a budget to deliver, not just a baby.

KELLY O’DWYER:

Indeed.

JON FAINE:

Good luck.

KELLY O’DWYER:

Terrific. Thanks Jon.