- SMSF Association Media Release
The SMSF Association is urging the Federal Government to deliver stability, consistency, and certainty for superannuation.
Association CEO Peter Burgess says: “We support in principle the concept of a legislated Objective of Superannuation. Continual changes to the superannuation system add complexity to what is an already complex system, at the same time eroding trust and confidence. Superannuation would benefit from simplification and the removal of red tape instead of persistent changes.”
“It is essential that the Objective provides appropriate and necessary guiderails and a fit-for-purpose anchor for Government policy. Tinkering and ad hoc changes should be actively discouraged. The objective should not operate to justify any Government’s short-term policies without proper consideration of the medium and long-term effects and consequences.”
“It must be very clear that the Objective is to apply solely in the context of policy design and implementation only. It should not extend beyond this remit to other stakeholders such as regulators or superannuation trustees.
The Association noted that the core purpose of superannuation is already addressed in the existing sole purpose test which is a fundamental component of the superannuation architecture. Its role is the application of superannuation compliance measures and taxation concessions. As such, it must be clearly distinguished from an objective of superannuation. An objective that sits above the operative provisions is needed to provide a clear policy framework and guidance.
Burgess warns that the “Objective alone is insufficient and risks poor policy design and outcomes. It needs to be underpinned by clearly legislated definitions, legislative design and operative provisions and guidelines.
“The proposed definition of ‘preserve’ is more restrictive than that of the sole purpose test. We agree that certain limitations should be applied to the purpose and use of superannuation and the concept of preservation. However, a more restrictive definition of preservation could lead to policies that fundamentally change superannuation policy in a manner that is incongruent with the sole purpose test.”
The Association’s submission notes that superannuation is just one component of a broader retirement income system.
“The framing of the Retirement Income Review and the final report highlights the importance of considering the broader policy impacts across the retirement system.
“An Objective that considers superannuation in isolation of the other retirement pillars risks distorted outcomes and negative impacts over the medium and long term. All future superannuation policies and their impacts must be assessed with proper consideration, and clear analysis of the outcomes and effects within the broader retirement income remit.”
Burgess concludes that the Objective’s definitions should not be so restrictive as to limit or prescribe how superannuation funds choose to invest members’ funds.
“The operation of the best financial interests applies to all trustees across the sector and functions as the essential test when making investment decisions for the fund.
“Choice is an important element of the superannuation system. Concerns have already been raised that the chosen terms of ‘equitable’ and ‘sustainable’ reflect a broader agenda to drive environmental, social, and corporate governance (ESG) investing. Although this would not appear to be the policy intent, it highlights the need for functional definitions that clearly articulate the target position.”