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Government keeps it simple on super objective

It’s the government’s hope to get a “simple” objective for superannuation across the line. The problem might be getting everybody else to stop talking about comfort and adequacy in retirement.

It seems that ridding the superannuation system of very generous tax concessions will have to wait for another day. ISN understands that, despite a headline in the Australian Financial Review on Thursday (January 19) suggesting that Treasury would consider scrapping tax concessions for superannuation balances of more than $5 million after legislating a long-awaited objective for superannuation, that measure has not yet been decided.

However, a spokesperson for assistant treasurer Stephen Jones (the minister who featured in the AFR’s frontpage article) confirmed to ISN that consultation on an objective would begin soon – with the intention of legislating one in the first half of the year – and that the government is hoping to roll out a fairly simple statement.

The superannuation industry generally hopes that a legislated objective will prevent the rollout of more policies they consider antithetical to the point of having retirement savings – including early release of superannuation, as seen during the Covid pandemic, or Scott Morrison’s political Hail Mary pass of using superannuation for housing, announced just days before the election that ousted him.

“It’s designed to make sure that people don’t have poverty in retirement, and they’re deferring their wages so that when they do retire and they can’t earn additional income they do have that dignity and are able to go to the dentist, have that meal at the club,” Glen McCrea, deputy CEO of the Association of Super Funds of Australia (ASFA), told ISN in August 2022.

“The objective is important. There’s a lot of big public policy initiatives at the moment and I know the government is weighing them up, but during this term I think there’s a real opportunity to provide a bit of certainty to consumers, and also for the Parliament to make it clear what super’s ultimately about.”

The Turnbull government previously tried to legislate the objective suggested by David Murray in the Financial System Inquiry (“to provide income in retirement to substitute or supplement the age pension”) but faced pushback from sections of the super industry, who pilloried it for not containing “aspirational” elements like “comfort” and “adequacy”.

Some of those finicky phrases like “comfortable” are still hanging around the industry.
In a letter sent to Jones and Treasurer Jim Chalmers in September 2022 by ASFA and the Financial Services Council (FSC), the two bodies said “We consider that it is timely that (the objective) is formalised as a preamble to the Superannuation Industry Supervision Act 1993 to make it clear that superannuation is about retirement and not about other public policy objectives”.

ASFA and the FSC’s joint position was that a legislated objective for superannuation should include four key elements – adequacy/comfortable standard of living, superannuation as one of the three pillars (ed: of retirement), income provision, and “all Australians”. With those four key elements in mind, the two bodies settled on a potential wording:

“To provide an adequate income to ensure all Australians achieve a comfortable standard of living in retirement, supplementing or substituting the Age Pension.”

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