Super needs simplification: SMSFA

Yasmine Raso

Senior Journalist, Financial Newswire

11 April 2023

The SMSF Association has signalled its support of the Federal Government’s proposal to legislate the objective of superannuation, but has also called for it to “deliver stability, consistency and certainty”.

The Association’s submission to the consultation paper said the objective should be considered as superannuation is only one aspect of a broader retirement income system and separate to the “core purpose” of super that is already contained in the existing sole purpose test.

“We support in principle the concept of a legislated Objective of Superannuation. Continual changes to the superannuation system add complexity to what is an already complex system, at the same time eroding trust and confidence. Superannuation would benefit from simplification and the removal of red tape instead of persistent changes,” Peter Burgess, the SMSF Association’s chief executive, said.

“It is essential that the Objective provides appropriate and necessary guiderails and a fit-for-purpose anchor for Government policy. Tinkering and ad hoc changes should be actively discouraged. The objective should not operate to justify any Government’s short-term policies without proper consideration of the medium and long-term effects and consequences.

“It must be very clear that the Objective is to apply solely in the context of policy design and implementation only. It should not extend beyond this remit to other stakeholders such as regulators or superannuation trustees.

“An Objective that considers superannuation in isolation of the other retirement pillars risks distorted outcomes and negative impacts over the medium and long term. 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 representative body also said the existing sole purpose test and the proposed objective must be clearly differentiated from each other and the objective should “sit above the operative provisions” to implement an effective policy framework.

“Objective alone is insufficient and risks poor policy design and outcomes. It needs to be underpinned by clearly legislated definitions, legislative design and operative provisions and guidelines,” Burgess said.

“The proposed definition of ‘preserve’ is more restrictive than that of the sole purpose test. We agree that certain limitations should be applied to the purpose and use of superannuation and the concept of preservation. However, a more restrictive definition of preservation could lead to policies that fundamentally change superannuation policy in a manner that is incongruent with the sole purpose test.

“Choice is an important element of the superannuation system. Concerns have already been raised that the chosen terms of ‘equitable’ and ‘sustainable’ reflect a broader agenda to drive environmental, social, and corporate governance (ESG) investing. Although this would not appear to be the policy intent, it highlights the need for functional definitions that clearly articulate the target position.”