It is wonderful to be here with you again, with your team, and I will join with you Sally in saying thank you to all of the very hard working Treasury officials who are here, who I think are barely standing at the moment because they have been putting a lot of work into a very important document that was delivered last night, the Budget.
The Budget though as the Treasurer has said, was no ordinary Budget, the Budget was the culmination of our economic plan for the nation and that plan is one that is all about backing hard working Australians, growing our economy, creating more jobs, more prosperity to ensure that we can continue to see the economic growth that we have enjoyed over the last 25 years.
Australians do know that our future depends on continuing to grow our economy as we transition from the mining investment boom to a more diversified, new and strong economy.
Our Government is focused on a number of things; on improving the tax system, providing better access to global markets through new export trade agreements, promoting competition, providing vital infrastructure, supporting innovation and entrepreneurship, encouraging high-tech jobs and helping get young people into work.
Tonight what I want to do very briefly is highlight a few elements of that plan – elements that will give Australians confidence that our economy and financial system are working for them.
Last night, as Sally and Brad have mentioned, the Treasurer announced a package of superannuation reforms.
One of which is enshrining in legislation, for the very first time, what the objective of the superannuation system is: it is to provide income in retirement to substitute or supplement the age pension.
It's remarkable to think that this hasn't been enshrined in legislation before now.
With this objective in place, the Superannuation package we announced last night is designed to ensure the sustainability, flexibility and integrity of our superannuation system as a whole. It will better target tax concessions. It will reduce the extent to which the superannuation system can be used for tax minimisation and estate planning rather than for providing retirement income.
It is critically important that in having an objective for the superannuation system, Australians can have more confidence that any potential changes to superannuation are measured against that objective – which I think will put an end to ad hoc changes in the superannuation space.
The introduction of the $1.6 million limit on the amount that can be transferred from the superannuation accumulation phase into the retirement phase and the introduction of a $500,000 lifetime non-concessional cap are key elements to improve confidence that the system is being used for its core purpose.
We are requiring those with incomes greater than $250,000 to pay 30 per cent tax on their concessional contributions, up from 15 per cent. These individuals have the capacity, and most likely very strong incentives to save, without the need for generous tax concessions.
Women and super
We also know that, in general, women have lower lifetime earnings and lower superannuation balances than men. On average, men aged between 55 and 64 have around $142,000 more in their super than women. That is because of the gender pay gap, because women spend twice as much time as men in unpaid work such as caring for children or loved ones such as parents — and because more women tend to spend more time working part-time rather than full-time.
At the same time, women have longer life expectancies than men, and thank goodness for that, so they are likely to need much higher balances to go further than men's, yet this is not the case.
Given these facts, we are making some changes to the system we think support strongly the need for women to be able to save better for their retirement. For one thing, we are replacing the Low Income Superannuation Contribution, which expires on 30 June next year, with a Low Income Superannuation Tax Offset. Meaning low income earners generally won't be paying more tax on super savings than on their other income. It is very important that this is on the taxation side rather than on the payment side.
We're extending the current super spouse tax offset by increasing the income threshold for the recipient spouse from $10,800 to $37,000, to help families support each other in accumulating super savings.
And, from 1 July next year, people with super balances under $500,000 will be able to access their unused concessional superannuation contributions cap space from the last five years — to make 'catch up' payments. People will also be able to make non-concessional contributions, subject to this $500,000 lifetime cap, at any time before 75 years of age.
We're also making the super system more flexible, through a number of tax and regulatory changes, to reflect differences in people's lives and in their patterns of work.
Along with existing measures, like the Government's co-contribution scheme, these changes will help low income earners, and people who take time out of the workforce, to accumulate superannuation for a better standard of living in their retirement. As well, these changes will make the system as a whole more flexible, more equitable, and more sustainable for the long term.
As I mentioned, the Government will lift certain restrictions on contributions to superannuation that apply to Australians aged 65 to 74 and instead apply the same contribution acceptance rule for all individuals under 75. This will allow people who are no longer working to top up their retirement savings or that of their spouse, when they have the capacity to do so. This will help women to top up their retirement income from sources of income that are not necessarily available to them before retirement, including proceeds from downsizing their home or small business proceeds.
ASIC Capability Review
Now to move on to other elements that I'm sure will interest many in the room.
The broader financial system also needs to be strong and sustainable, because it touches on the lives of every individual, every family and every business.
Two weeks ago, we announced a package of reforms designed to improve the way our financial system is regulated.
As part of our response to the Murray Financial System Inquiry, we commissioned a capability review of the Australian Securities and Investments Commission (ASIC), and we have acted on the recommendations made to strengthen ASIC's powers and their resourcing.
We're committing $57 million of new funds to their enforcement and surveillance capability, and $61 million of new funds to help them take advantage of new technology and analytical techniques.
We're also introducing an industry funding model for ASIC, so that its important regulatory activities are actually paid for by those institutions that it regulates. This is already the case with APRA and other comparable regulators overseas.
We're reviewing the bodies and mechanisms for consumers to make complaints or resolve disputes, and we're extending the term of the Chair of ASIC to oversee all these changes over the next eighteen months. And we are also appointing a new commissioner to ASIC who has experience in prosecuting financial crime.
I am delighted to announce tonight the expert panel that will review the consumer complaints handling framework for financial services:
Professor Ian Ramsay who is known to many in the room will serve as chair. Ian is Professor of Commercial Law at the University of Melbourne; is a member of the Law Council of Australia and currently serves on its Corporations Law Committee. Ian has extensive experience as an expert consultant to government reviews and as a member of government advisory committees.
Ms Julie Abramson will be a panel member. Julie is a lawyer with over 20 years regulatory experience at both Federal and State levels and was appointed as a part-time Commissioner to the Productivity Commission in December 2015. She has particular expertise in financial services regulation and competition policy, including as a previous member of the Banking Code of Practice's Compliance Committee.
Finally, Mr Alan Kirkland who will be the final panel member. Alan has been the CEO of Choice for the past three-and-a-half years and has extensive experience in consumer advocacy.
He will bring a strong consumer focus to the review and help ensure it delivers on the Government's commitment to improve outcomes for consumers.
In summary, I think it is very clear that we want strong oversight of Australia's financial system so that it meets the needs of Australian consumers, Australian Businesses, and Australian families.
Asia Region Funds Passport
Finally, I want to highlight what was mentioned by Sally before – the Asia Region Funds Passport. Last week, I signed the Passport's Memorandum of Cooperation with Japan, Korea and New Zealand.
This signing concludes six years of negotiation with our regional partners. In these negotiations, we've been guided by our industry champions, led in no small measure by the Financial Services Council. You have contributed greatly to making sure these arrangements are commercially attractive and accommodate the latest innovations in funds management.
This Passport will mean that Australia's sophisticated managed funds industry will be able to access a single, significant market, with high standards of investor protection right across the Asian region.
Measures we've just taken in the Budget to introduce two new collective investment vehicles, or CIVs, will mean our funds management industry is better able to capitalise on the Passport. Introducing them at the same time as the Passport means Australian funds managers get a head start in what will be a very open and competitive market.
And I want to reassure those in the room here tonight that we will also be looking at CIV withholding taxes in the coming financial year. Because we want the funds management industry to have a very strong competitive advantage with their competitors overseas.
The Government will now give priority to legislating the Passport arrangements.
And Australia has led this financial integration initiative, and our leadership was supported and encouraged by the Australian industry. I'm very proud of what we've helped bring about, and you should be too.
Most of you will know the Managed Investment Trusts legislation was passed by Parliament today. These reforms have benefited from constructive stakeholder engagement including your members and I believe this new legislation will enhance the competitiveness of Australia's funds management industry.
As I said, Australia's financial system is vital to our economy. It's a strong and stable one by world standards, but there is always room to make it better. The Turnbull Government takes seriously the responsibility we have to strengthen and sustain our financial system, so that it can support Australians to lead and build the lives they want, at every stage.