Treasury’s consultation on the superannuation performance test closes this week. It is the right reform at the right time, and we must not fumble the opportunity for vital social infrastructure investment by narrowing it to three sectors.
In the Treasurer’s frequently misunderstood 2023 essay, ‘Capitalism after the crises’ he made the case for connecting business disciplines to social purpose, generating risk-adjusted returns and measurable social outcomes together. The obvious question it invited was whether and how Australia’s $4.5 trillion superannuation pool could be utilised to help deliver the building of high-quality social infrastructure Australians actually need? And in doing so, satisfy the fiduciary responsibility of superannuation fund trustees to deliver financial returns in the best interests of members.
Treasury’s consultation on the performance test goes to the heart of why this has not yet happened at scale.
Treasury states that the test ‘is not sector-neutral’ and ‘discourages investment in emerging or alternative asset classes that are not well represented in existing benchmarks’. With the lived experience of over a decade as a director and investment committee chair of one of Australia’s largest superannuation funds, I can attest to the barriers the poorly-thought-through performance test presents to investments of this kind. In practice, the performance test chokes consideration of worthy investments that fall outside defined existing asset classes.
The consultation paper offers three illustrative examples, namely social and affordable housing, renewable energy, and venture capital. It proposes a new ‘emerging assets’ category, capped at 5 per cent of a product’s allocation and measured against inflation rather than market indices. That is a sensible step in the right direction, but it needs to be more broadly defined.
The Treasurer’s 2023 article made the case for this directly. He named aged care, disability service delivery, and social and affordable housing as sectors built for large-scale impact investing. The same diagnosis fits early childhood education with equal force. These are large, regulated, long-duration asset classes suited to super liabilities, and they are where the country’s most pressing social infrastructure deficits sit.
The fix is straightforward. The new category should be defined to name all four sectors, aged care, disability accommodation, early childhood education and care, and social and affordable housing, and benchmark them against inflation, as the economics of these assets warrant.
Aged care is an area of particular focus and opportunity, because the gap between need and supply has become difficult to look past. Almost 3,300 older Australians are stranded in hospital beds waiting for an aged care placement, a number that rose by 35 per cent in around six months (ABC News, 11 May 2026).
Australia needs around 10,600 new aged care beds each year to keep pace with demand. Last year, net new capacity across the sector was 850, most from reactivating existing rooms. For Purpose Aged Care, the platform built with impact investment capital, delivered around 450 of those new beds, the country’s largest single contribution to new supply, and less than 5 per cent of what the sector needs.
Aged care is not new as a service. As an investable, institutional-grade asset class, it is genuinely emerging: purpose-built homes sized to superannuation’s duration and indexation needs. The numbers tell you why. A 144-bed home costs around $62 million to develop, so 10,600 new beds a year is a $4.6 billion annual pipeline. The Aged Care Taskforce puts the capital needed to build and refurbish residential aged care at $56 billion by 2050. That is institutional scale, several times the Housing Australia Future Fund.
Two things have held this back. The first is the aged care settings. Care revenue capped at cost has removed the cross-subsidy that historically made the capital case work, and a 20-year payback period sits well outside the horizon of most institutional lenders. The Final Report of the Commonwealth Impact Investing Taskforce I chaired argued that providers and investors need cashflow certainty in asset classes like this. In aged care this could include accommodation supplements that reflect real build costs, regular indexation, and reform of the 40 per cent supported resident threshold.
The second is the performance test. Even with the right settings in aged care, super capital will not flow at scale until the test stops treating long-duration social infrastructure as benchmark risk. This goes to the heart of what Treasury should weigh through this consultation.
The For Purpose Aged Care not-for-profit platform was anchored by a $75 million commitment from Qantas Super, now held by Australian Retirement Trust. Australian Ethical has grown its position to $30 million, and NAB, CBA and Bank Australia have together extended over $260 million in debt facilities.
These are not concessional allocations. They are institutional capital pricing risk-adjusted returns against measurable social outcomes. It is the same combination of capital, talent and evidence that took Goodstart Early Learning from a bankrupted asset to a billion-dollar social enterprise delivering a 12 per cent annual return over eight years.
None of this asks trustees to trade returns for good intentions. Trustees must invest in their members’ best financial interests, and these assets meet that test. They deliver stable, inflation-linked, risk-adjusted returns, with low correlation to listed markets. The problem has never been the investment case. The problem is a benchmark that makes a sound, long-duration asset look like underperformance, and so deters the trustees who should be holding it. Correcting that widens what trustees can consider, and that is squarely in members’ interests.
Submissions close on 19 June, and the decision now sits with Treasury. Its own framework points to a wider answer than the one currently proposed. Some of that super fund capital is flowing. More is needed. Australian super exists to give each of us a better retirement. If along the way we cannot afford a home, a place for our children to learn, or somewhere to be cared for in our later years, how wealthy are we?
Michael Traill AM is executive chair of For Purpose Investment Partners and was chair of the Commonwealth Government Social Impact Investing Taskforce Expert Panel.
