It’s crucial the Objective of Super is embedded for the industry to move forward
It’s crucial the Objective of Superannuation legislation is embedded as it will give a framework for policy moving forward, said a leading adviser.
Aaron Dunn, founder and CEO of Smarter SMSF, said with a legislated framework in place, the pillars underpinning the Objective of Super can then be measured against future policy decisions at a government and industry level.
“When the consultation came out on the Objective of Super, the terminology or wording within the Objective had five elements or concepts, and you have to look to those to understand what future direction government policy may take,” he said.
“The first was preserving savings which is all about restricting access to superannuation only for retirement purposes and relates to the early release of super.
“The second is deliberate income and is based on the principle of providing income in retirement from superannuation and it not being there for bequests or wealth accumulation.
“The third revolves around the concept of dignified and brings in financial security and well-being and there may be an element of aged care in that.
“The fourth is about Government support and it was spoken about back in 2013 in regard to the aged pension.
“The fifth pillar or concept deals with equity and sustainability and is concerned whether the government can sustain the concessions in the current environment.”
Mr Dunn said once the Objective of Super is legislated these five concepts will become the pillars for government policy moving forward and will be used to test any piece of legislation it may propose.
“[The Government] will use these to see if any policy is, for example, delivering income in retirement, or are people relying on government support,” he said.
“In the back of the consultation you can see that all of these concepts or pillars are also assessed against things like human rights.
“That is why this [Objective of Super] has become so important.
“If it does meet all these objectives then there is a basis for what the Government is doing.”
He said the concept of an Objective of Super has been on the back burner with successive governments for the past 10 years since the 2013 financial systems inquiry.
“Everything that has been developed in the time being has been on what suits the Government rather than on retirement income needs,” he said.
“Once that Objective is set the Government will likely have some policy settings it would like to look at acting on quickly, and the $3 million super tax is one of those since it is meant to kick off on 1 July 2025.
“Then it may look at issues on which it can have quick wins such as the use of superannuation for things like cosmetic surgery. It will most likely test other elements and get feedback on certain areas of law it may want to change and then work from there whether it is an immediate issue of a mid-to-long term one.
“I would find it staggering that the Government would be able to legislate superannuation for aged care when you have no control over the health and wellbeing of individuals.
“It may need to have policy settings to see how the aged pension interacts with superannuation, and these are things the Productivity Commission has spoken about for a long time – how we evolve as a society.
“Without an Objective for Super it is like trying to build a house without the foundations put down first.
“There are other covenants in legislation but as superannuation has grown substantially, we need these foundation settings to dictate policy going forward.
“Policy settings change over time and there will no doubt be debate whether the definition is fit for purpose in say 15 years, but let’s just get on with it and then evolve as we go to make sure it suits the generation of the day.”
Aaron Dunn will appear at the 2023 SMSF Adviser Technical Strategy Day to unpack how the SMSF sector could navigate the new era of document management, the current state of the law, pitfalls to avoid, and how upcoming legislation could impact the documentation process.
The SMSF Adviser Technical Strategy Day 2023 will be held in the following locations:
- Tuesday 17 October at the Four Seasons Hotel Sydney
- Wednesday 18 October at Rydges Southbank Brisbane
- Wednesday 25 October at Grand Hyatt Melbourne
Click here to buy your tickets and don’t miss out!
For more information about the event, including agenda and speakers, click here.
