The debate over the future of the superannuation performance test has intensified ahead of the federal budget, with Treasurer Jim Chalmers flagging an updated government paper on possible reforms and the Coalition warning against any move it sees as weakening protections for fund members.
Chalmers said he and assistant treasurer Daniel Mulino would release updated thinking on the performance test in the coming days or weeks, while stressing the government had no intention of dismantling or diluting the regime.
Speaking to the press in Canberra, he described the test as a “really crucial part” of the superannuation system, but said the government believed there were still issues worth examining.
“The next thing is I wanted to indicate to you that soon, in the coming days or weeks, I will be releasing some updated thinking on the superannuation performance test,” Chalmers said. “I want to be really clear that I have absolutely no interest in watering down or ditching the performance test. I see it as a really crucial part of the superannuation system.”
He said the government remained open to reform where the current framework created “barriers to some types of investment”, but insisted any changes would need to preserve high standards and maintain trustees’ obligations to members.
Chalmers also said there was no consensus across the sector on the best way forward, despite extended discussions.
“There are also barriers to some types of investment, and we have indicated a willingness privately and publicly with the funds and publicly with all of you to reform the performance test if we can do that in a way that doesn’t diminish the high standards and in a way that doesn’t diminish super funds’ responsibilities to members,” Chalmers said.
The comments drew a swift response from shadow assistant treasurer and shadow minister for financial services Kevin Hogan, who said the performance test had been one of the system’s most important member protections and warned against any changes that could weaken it.
“The performance test has been one of the most important reforms to safeguard Australians’ retirement savings,” Hogan said. “It has lifted standards across the system and helped ensure people retire with more, not less.”
Hogan said the Coalition introduced the test to expose underperforming funds and protect retirement balances, arguing it had contributed to lower MySuper fees and prompted members’ savings to move away from weaker-performing products. He said the opposition would engage with any proposed reforms but remained concerned about unintended consequences for returns.
“That’s real money for Australians in retirement,” Hogan said. “Even a one per cent difference – through lower fees or stronger returns – can mean hundreds of thousands of dollars more.”
While Hogan welcomed the Treasurer’s public commitment to retaining the test, he said the Coalition remained wary of any changes that could reduce the discipline it imposes on super funds or shift focus away from members’ best financial interests.
“We welcome the Treasurer recognising the test has been successful,” he said. “But there is a real risk the Government sees it as a barrier to directing super into their political priorities like social housing and green infrastructure.”
The latest exchange sets up a renewed policy debate over how the performance test should evolve, with the government signalling a willingness to adjust settings where it believes investment distortions exist, and the opposition arguing the current framework has already improved outcomes by lifting standards and putting greater pressure on underperforming funds.
