The Institute of Financial Professionals Australia (IFPA) has outlined its concerns with legislating the objective of super in its submission to the Senate inquiry into the Superannuation (Objective) Bill 2023.
The government first introduced the bill to Parliament in November, outlining the specific objective to “preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way”.
This is unchanged following the consultation process.
On 30 November, the Senate referred the provisions of the Superannuation (Objective) Bill 2023 to the Senate Economics Legislation Committee for inquiry.
But the IFPA has criticised the bill for its “broad-brush” definition, claiming that the proposed objective is both too lengthy and contains too many terms that are “open to interpretation or manipulation by current and future governments”.
“Almost all the changes that have occurred in the past could be justified under the objective of superannuation definition due to the broad-brush wording,” the body wrote in its submission.
“This will weaponise policymakers to use the objective as a sword to continue making changes to superannuation rather than the objective of acting as a shield to protect the system from political interference which is unrelated or is in conflict with the objective.”
The IFPA further opined that the proposed objective will not achieve “any real purpose” for as long as it lacks enforceability.
Namely, despite there being a statement of compatibility to ensure future super legislation aligns with the objective, this will not be binding on current or future policymakers, governments, courts or tribunals.
As such, there will be no consequences for failure to comply with the said obligation, with the IFPA arguing that the bill, if legislated, will be reduced to a “tick the box exercise” as opposed to creating enforceable change.
Instead, the body has called for a number of alternatives to the proposed regime, the first being to revisit the sole purpose test.
It said: “In our view, the core objective of superannuation is better captured by this existing test as it requires that superannuation funds are maintained for the purpose of providing retirement benefits to its members, or to their dependents if a member dies before retirement.
“As the sole purpose test already exists and influences trustee behaviour and their role in the superannuation system, it could be amended rather than having a separate objective.”
The IFPA further flagged the isolated nature of the proposed objective, and suggested that if one is to be created, it should concern the whole retirement income system.
Namely, as per the Retirement Income Review 2020, Australia’s retirement income system consists of superannuation, the age pension and voluntary savings – three pillars that are “inextricable”, according to the professional body.
“Any legislated superannuation objective aimed at influencing policymakers moving forward must be considered in the context of the overall retirement income system encompassing these other pillars.”
Finally, the IFPA called for an end to the “constant tinkering” of Australia’s super system, and suggested that a conversation about comprehensive reform would be more productive.
This is highlighted on the back of the Division 296 proposal slated to commence in FY2025–26, which proposes to reduce tax concessions available to individuals by introducing an additional 15 per cent tax on earnings on superannuation balances above $3 million.
“Continual changes not only targets retirement savings, but promotes instability and uncertainty in the sector, which in turn may discourage investment,” it concluded.
Speaking to Super Review’s sister brand, SMSF Adviser, in September, IFPA head of superannuation and financial services Natasha Panagis said that the government has not been “shy” regarding its plans for the nation’s super savings.
“The government has been quite vocal on its plans to use superannuation for a whole range of things, and although some of them may be items that are socially equitable, like low-cost housing, we don’t support this idea for a whole range of reasons,” Ms Panagis said.
“The way the objective of super is framed makes it seem the government sees super as the answer when it faces a funding shortfall. Ultimately, it sees it as a pool of capital.”
