Objective of superannuation needs transparency: SMSFA

In its submission to Treasury’s exposure draft, the SMSFA made three recommendations:

1. Legislate the objective in standalone legislation.
2. Ensure the objective is clear and self-contained with clear definitions, operative and interpretive provisions.
3. Make clear that the objective is to apply solely in the context of policy design and implementation only and does not affect the operation of existing laws.

It stated that this will ensure the legislation does not extend beyond its remit to other stakeholders such as regulators or superannuation trustees, and does not change the operation or interpretation of existing superannuation law, prudential standards or governing rules of superannuation entities.

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The SMSFA said to ensure suitability of purpose, the draft policy settings need further refinement.

“Superannuation is just one component of a broader retirement ecosystem system. The framing of the Retirement Income Review and the final report highlights the importance of considering the broader policy impacts across the entire retirement system,” the submission stated.

“What is proposed, is an objective which focuses on a single element of the retirement income system.”

It claimed that although the explanatory notes attached to the draft exposure acknowledge the three retirement incomes, the broader retirement system, including aged care, and housing security, these are not contemplated in the operation of the objective of superannuation.

“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 system remit.

“It must extend beyond a single element such as tax concessions.”

The submission continued that the current legislative framework is complex and a product of a proliferation of changes over time, and suggested that superannuation would benefit from simplification and the removal of red tape rather than persistent changes.

“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, impacting the sustainability of the superannuation system through increased costs and a decline in engagement.”

Moreover, the SMSFA recommended that the concept of ‘sustainable’ in the exposure draft explanatory materials be expanded beyond taxation and fiscal considerations.

“The addition of further complexity and red tape is detrimental to the system and must be actively discouraged,” it stated.

Finally, the submission said the objective of superannuation “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”.

“We note that the objective will require a statement of compatibility that includes an assessment of whether a Bill or Regulations are compatible with the objective of superannuation,” it stated.

“For transparency, it is integral that a genuine assessment is made and included within the statement of compatibility to the respective Bill. The underlying policy needs must be clearly articulated and supported alongside a considered analysis on how it satisfies the objective of superannuation.

“This includes the publication of all relevant data and modelling. Standardised or templated responses such as those used for the Statement of Compatibility with Human Rights must be prohibited.”