If one thing should be welcomed from the Federal Government’s superannuation policy announcement earlier this month, it is that it has finally moved to fix what remained an ill-advised and unduly punitive excess contributions regime.
It was a measure of the inappropriateness and inflexibility of the excess contributions regime that the chairperson of the Superannuation Complaints Tribunal, Jocelyn Furlan, earlier this month told a Super Review roundtable that excess contributions issues represented a growing part of the Tribunal’s workload.
It was also a measure of the inappropriateness of the regime that a former Tax Commissioner had made it clear that he believed the regime was unduly harsh and problematic.
That it took the Government more than three years to fix the problem is deplorable, but the fact that it is now finally fixed should be welcomed and should be actioned during the Budget session of the Parliament.
The centre-piece of the policy announcement by Treasurer, Wayne Swan and Financial Services minister, Bill Shorten, is of more questionable value to the superannuation industry, notwithstanding the fact that the Government is right in its assessment that the super system has been overly generous to upper income earners and the “fabulously rich”.
The problem with the Government’s approach is not its ultimate objective – the withdrawal of tax advantages for those who least need them – but the clunky method by which it is seeking to achieve the objective.
It is no accident that many people have discussed the Government’s policy approach in much the same terms as they discussed the superannuation surcharge – the much-derided policy of the former Howard Government.
Further, and notwithstanding the position adopted by the Association of Superannuation Funds of Australia, genuine question marks hang over the Government’s $100,000 a year threshold and whether, in fact, it will only touch as few as 16,000 superannuation account holders.
The bottom line, of course, is that the Government’s announcement did represent policy-making on the run, albeit that at least some elements of what it announced had undoubtedly been a part of general discussion within the Treasury as it canvassed its options in the lead-up to the Federal Budget.
Then, too, there is the genuine probability that the Government will lose office before it gets the opportunity to translate its policy announcement into legislation. Certainly, it is very unlikely that the necessary regulations would be put in place before the Coalition finds itself sitting on the Treasury benches.
While the Shadow Treasurer, Joe Hockey and the Shadow Assistant Treasurer, Senator Mathias Cormann, have slammed the super policy approach announced by the Government this month, they will at the same time be breathing a sigh of relief that it did not ultimately present them with anything that they could neither side-step nor subtly amend when they find themselves running the Treasury and superannuation portfolios.
Given time and some genuine policy analysis it should be possible to design a much more elegant approach to achieving the long-term sustainability of the superannuation industry – at the same time as recognising some of the imperatives outlined in a succession of Treasury intergenerational reports.
The need for Governments to take a longer-term view was recognised by the newly-installed chief executive of the Australian Institute of Superannuation Trustees (AIST), Tom Garcia, who told a recent Super Review roundtable that there was nothing wrong with pursuing change to superannuation policy, provided it involved a considered long-term approach.
Few people in the superannuation industry would argue with the underlying objective inherent in appointing a Board of Guardians with respect to the long-term policy objectives of the superannuation industry, but plenty will worry about how that board of guardians will be constituted.
Given the make-up of the stakeholder panels the current Government put in place for the Future of Financial Advice and Stronger Super changes, it would seem advisable to place responsibility for such appointments with the Parliament via a genuinely bipartisan process.
If this month’s policy announcement – taken with the raising of the superannuation guarantee – is to be seen as the Gillard Government’s superannuation legacy, then it will be remembered as workmanlike rather than inspiring.
