Industry funds canvass venture capitalism

The major industry superannuation funds want the Federal Government to remove current fee and cost barriers to allow them to more effectively provide venture capital.

The Super Members Council (SMC) has used its submission ahead of the Government’s Economic Reform Roundtable to argue that superannuation funds could help jump start productivity and generate better returns for members by providing capital to scientific startup innovators.

The SMC claims its proposals will complement existing venture capital channels such as Australia’s Medical Research Commercialisation Fund and US university-linked endowment partnerships.

In doing so, it noted that Australian investment in venture capital as a per centage of GDP lags well behind other advanced economies and is 15 times lower than the the US.

“For too many Australian entrepreneurs, this has meant taking their innovations overseas to commercialise,” the SMC said.

It suggested that increasing Australia’s investment in private equity from the current level of 6 to 10% of super savings could see $50 billion flow to start-ups and other innovative private companies and boost returns.

SMC’s submission sets out 7 recommendations to jumpstart productivity and sets out an actionable blueprint for national economic growth, through smarter regulation and tackling system inefficiencies, and giving certainty for counter-cyclical investments to support the economy during downturns.

It said its proposed package of reforms would drive a strong uplift in national productivity and living standards, boost economic growth, make the federal Budget more sustainable, and enhance intergenerational fairness.

The Super Members Council’s recommendations include:

• Create a new formal pathway to better match super capital with scientists, startups and entrepreneurs.
• Simplify performance testing and fee disclosures to cut red tape and reduce barriers to investing in new asset classes, while keeping high standards of consumer protection.
• Ensure super tax concessions are better targeted to support low-income workers and reduce reliance on the Age Pension.
• Commission a fresh fast-track Productivity Commission review of regulatory compliance costs and inefficiencies to deliver more money into the retirement nest eggs of Australians with super.
• Enable super contributions into retirement phase accounts and improve data sharing to make it easier and simpler for retirees to navigate the system.
• Fix unpaid super with urgent payday super laws, pay super to all under-18 workers, and give a fairer super tax deal to 1.2 million low-income workers (by lifting the Low-Income Super Tax Offset). This will help lift Australian’s retirement balances, reduce Age Pension outlays, and strengthen the federal Budget.
• Asking all policymakers to pledge support for the long-term system policy pillars that keep super strong for Australians, including preservation, to ensure investment certainty and economic resilience.

SMC chief executive, Misha Schubert said Australia’s super system is set to become the second largest in the world, and better connecting it with top innovators could boost investment returns for everyday Australians.

“Australia has shown it can punch above its weight in biotech, medtech, AI and quantum – all productivity gamechangers that could be supercharged, yet we’re seeing too many of our brightest commercialise their innovations overseas because of current barriers for super capital to invest at scale.”

“It’s time to create a better pathway to match more of the vast pool of capital in Australia’s super system with our nation’s most promising science and startup entrepreneurs, to generate stronger investment returns for Australians with super, boost income, and give Australian productivity the shot in the arm it desperately needs.”