Super objective is just back to the future

Analysis

The Government’s consultation paper around the objective of superannuation is actually just a restatement of what everyone thought was the objective a decade ago.

Before certain backbenchers within the former Coalition Liberal/National Party Government began arguing for the use of superannuation for home deposits and before the former Government allowed early access to superannuation for COVID-19 pandemic relief it was broadly accepted that superannuation was for retirement savings and mostly inaccessible until preservation age.

So, the objective outlined in the consultation paper that superannuation is to “preserve savings to deliver income for a dignified retirement, alongside government support in an equitable and sustainable way” sounds like common sense unless you are a Liberal/National Party politician or somehow involved in the Australian residential housing industry.

The release of the Treasury consultation paper this week will doubtless give rise to dozens of submissions from “stakeholders” and probably plenty of discussion forums within which the proposed “objective” will be discussed alongside analysis of the impact of the former Morrison Government’s pandemic early release scheme.

A more challenging part of that discussion will be that around the consultation paper’s declaring that “the purpose of superannuation is not for minimising tax on wealth accumulation or enabling retirees to leave tax effective bequests”.

The Treasurer, Jim Chalmer and the Assistant Treasurer, Stephen Jones, know full well that they are going to run into minimal opposition to removing the tax benefits applying to large superannuation balances ($5 million or more) but plenty of opposition to any moves appearing to dictate how people apply their superannuation balances in the draw-down phase. That is why the May Budget will likely include an announcement regarding the tax status of high superannuation balances.

Everyone knows that too many people, believing they do not have enough superannuation savings, fail to sufficiently draw down on it in retirement but this represents an argument for better information and education around retirement income adequacy than an argument for a legislative dictate.

The four key questions attaching to the consultation paper appear benign but need to viewed in association with the precisely modulated words used by Treasury to explain the objective of supeannuation.

Those four questions are:

1. What do you see as the practical benefits or risks associated with legislating an objective of Australia’s superannuation system?
2. Does the proposed objective meet your understanding of the objective of the superannuation system in Australia?
3. Is the proposed approach to enshrining the objective in legislation appropriate? Are there any alternative ways the objective could be enshrined?
4. What are the practical costs and benefits of any alternative accountability mechanisms to the one proposed?

Expect plenty of political heat from the superannuation for housing advocates.