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Treasury to enshrine ‘objective of superannuation’ in legislation
The federal government is seeking stakeholder feedback on its plan to legislate an objective for Australia’s superannuation scheme, while Treasurer Jim Chalmers used the opportunity to again signal a crackdown on super tax concessions.
“We’ll move to end the super wars once and for all, and make sure that future changes to the system are compatible with its very objective,” he said. “Doing that requires that we embed super’s purpose into law.”
With more than $3.3 trillion in assets, the super pool represents nearly 140 per cent of the national GDP and is the world’s fourth largest retirement savings pool – making it “the envy of the world”, Chalmers and Assistant Treasurer Stephen Jones said in a joint media release February 20.
“But the last decade has seen the former government raid the superannuation system for their own purposes – with devastating impacts on Australians’ savings,” they said.
The proposed objective of superannuation is “to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way”, although it also suggests versions with slightly different wording.
“There’s a fair bit to unpack in just one sentence – and much of that will be done through the consultation process,” Chalmers said February 20 in a speech hosted by Conexus Financial, where he explained the government is aiming to “protect super’s core purpose – better retirement incomes – while also maximising its potential, including through greater investment in our national priorities, in a way that delivers for members.”
Many recent controversial policy proposals, including the pandemic-era rule allowing for early withdrawal from super, happened in part “because our predecessors were navigating the super landscape without a compass,” Chalmers said.
“Legislating super’s objective will change that because for the first time we’ll have a true north – a shared goal that we can work toward together.”
Industry groups welcome proposal
The announcement was followed by statements of support by several leading superannuation industry bodies. Peter Burgess, deputy CEO and director of policy and education at the SMSF Association, said the group has been advocating for such an objective since the Financial System Inquiry first recommended it in 2014.
“Legislating the objective of superannuation will provide stability and confidence to policy makers, regulators, the industry and the community that changes to superannuation policy will be aligned with the purpose of the system,” Burgess said.
“The concept of a ‘dignified retirement’ is something that the SMSF Association has long advocated, so we are pleased that this concept is now forming a central plank of the government’s proposed objective for superannuation.”
The Australian Institute of Superannuation Trustees also welcomed the government’s release of the consultation paper.
“Superannuation is for retirement, not a piggybank to be opened when convenient, so legislating an objective will help to protect super from interference in future,” AIST chief executive Eva Scheerlinck said February 20. “The definition recognises the centrality of preservation of superannuation benefits until retirement, equity in the system and the important role superannuation plays in providing a dignified retirement.”
And the Association of Superannuation Funds of Australia endorsed the government’s proposal “as an inflection point in the evolution of Australia’s world-class retirement income system.”
“The government has proposed an objective that can underpin much needed policy stability and help anchor future policy debates in ensuring our age pension remains affordable, that superannuation savings are preserved to retirement, and that the system delivers in an equitable manner for women and low-income earners,” ASFA CEO Martin Fahy said.
The deadline for submissions in response to the consultation paper is March 31.
Concessions under fire
Chalmers used the announcement of the consultation to underscore recent comments reflecting concern over misuse of tax concessions in superannuation, as super tax breaks are on track to cost the government $53 million.
“When I think about how best we can use the budget to support Australians toward a better retirement, one fact stands out,” he said.
“Right now, we’re on track to spend more on super tax concessions than the Age Pension by around 2050. I’m not convinced that’s a sustainable way to get to our destination – good retirement incomes for more Australians, now and into the future. While our immediate focus is consulting on the objective of super, that can’t be the end of the conversation about super’s sustainable future.”
