Objective of super opens door to government ‘tinkering’: IFPA
The proposed objective of super will allow the government to continue to make taxation changes, the Institute of Financial Professionals Australia has claimed.
The Institute of Financial Professionals (IFPA) head of superannuation and financial services, Natasha Panagis, said the association remains opposed to the objective of superannuation stating “the proposed objective is loaded with terms that are open to interpretation or manipulation by current and future governments”.
“In our view, the key words ‘equitable’ and ‘sustainable’ could be a flag post for future changes to the superannuation system,” she said.
“The exposure draft legislation wording strongly implies that the sustainability of the superannuation system will be subject to the broader budgetary and fiscal position of the Commonwealth at any given time.
“Such broad wording will still enable policymakers to use the proposed objective to make the overall superannuation system less generous to individuals planning for their retirement.”
She said the government is already using the proposed objective through its proposed extra 15 per cent tax to reduce tax concessions on superannuation balances.
“As can be seen with the extra 15 per cent tax proposal, the main purpose of the objective is for the regulators, policymakers, and the government, as it allows them to continue tinkering with the system in the future,” she continued.
She said that policymakers will need to weigh the cost of tax concessions when assessing future superannuation policies against the objective of superannuation.
“The objective should not operate as a mechanism to allow the government to make continued changes or act as a means to justify the short-term policy and fiscal objectives they wish to achieve at that moment in time at the expense of investor confidence,” she said.
Ms Panagis said although the introduction of the statement of compatibility in the exposure draft legislation is welcome the IFPA has concerns about its operation and enforceability.
“In the end, if the objective is legislated, there will be an obligation to prepare and lodge a statement of compatibility but it will not be binding on current or future policymakers, governments, courts or tribunals,” she said.
“It will provide no rights and will have no consequences for failure to comply with that obligation. In other words, the legislation will be ineffective for everything due to its lack of enforceability. As such, we believe legislating the objective will not achieve any real purpose.”
She continued that if an objective of super is needed, it should be based on the existing sole purpose test which already contains an excellent legislated purpose.
“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,” she said.
“It is also our strong view that formulating an objective in isolation without factoring in the three key pillars of the retirement income system is flawed.”
She concluded that any legislated superannuation objective aimed at influencing policymakers moving forward must be considered in the context of the overall retirement income system encompassing the other pillars and not be formulated in isolation.
