SMSF Association says objective of super can’t be achieved without more consideration
Superannuation would benefit from simplification and the removal of red tape rather than persistent changes, said the SMSF Association in its submission on legislating the objective of superannuation.
While the SMSFA said it supported in principle the concept of legislated objective of superannuation, it stressed that the sole purpose test is at the core of superannuation, and it first must be clearly distinguished from an objective of superannuation.
“The latter is needed to provide a clear policy framework and guidance. However, to avoid a stricter interpretation on the objective of superannuation, a nexus to the sole purpose test will be needed,” the SMSFA submission stated.
“The sole purpose test is not a new concept, and its presence and operation substantially predates the Superannuation Industry (Supervision) Act 1993.
“We acknowledge the important role that the sole purpose test plays in the application of superannuation compliance measures and taxation concessions.
“The core purpose of superannuation is already addressed in the existing sole purpose test and is an essential core component of the superannuation architecture.”
The submission continued that superannuation needs stability, consistency, and certainty. “Continual changes to the superannuation system add complexity to what is an already complex system. This erodes confidence and trust in the system,” it stated.
Further, the SMSFA pointed to the financial system inquiry and noted that in this document, it was stated that while the right framing of the objective of superannuation is vital, it “should not operate as a mechanism to allow continued changes or act as a means to justify any government’s short-term policies without proper consideration of the medium and long-term effects and consequences”.
“The framing of the Retirement Income Review and the final report highlights the importance of considering the broader policy impacts across the retirement system. Indeed, the review recommended the introduction of an objective for the broader retirement income system,” it said.
The SMSFA said it believes that what is proposed in the consultation paper is an objective that focuses on a single element of the retirement income 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,” it stated.
“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.”
The SMSFA said it would welcome an objective to superannuation that is firstly legislated in standalone legislation, is clear and self-contained with clear definitions, operative and interpretive provisions.
It said that it must also be made clear that the objective is to apply solely in the context of policy design and implementation only and not extend beyond this remit to other stakeholders such as regulators or superannuation trustees.
Any objective must consider superannuation in the broader retirement income framework and recognise that superannuation is already a highly complex system, and focus should be placed on simplicity and the removal of red tape.
Additionally, an objective should depoliticise superannuation and remove persistent, ad hoc, and haphazard changes.
