The passing of the bill to enshrine an objective of superannuation into law is unlikely to alter the operation of the proposed Division 296 tax, but will be used by the government to promote its credentials in the retirement income space, according to an industry body.
Institute of Financial Professionals Australia head of superannuation and financial services Natasha Panagis said while the focus of the objective is to preserve savings to deliver income for a dignified retirement in an equitable and sustainable way, the new law also suited the government’s policy aims.
“The objective isn’t just about preserving retirement savings; it’s also about preparing the government’s platform for the next federal election and beyond that,” Panagis said today during a presentation to the institute’s members.
“Many critics see the bill as being more symbolic than binding and while future policies must align with the statement of compatibility, there’s no legal obligation to strictly adhere to the objective.
“In many ways, it is a motherhood statement. The broad language could open the door for more changes and terms like ‘equitable’ and ‘sustainable’ are vague enough to justify new taxes if the budget deteriorates.
“Optimists might hope it prompts a rethink of the Division 296 tax, given taxing unrealised capital gains seems inconsistent with the principles of fairness and sustainability, but given the government’s recent track record, I wouldn’t get your hopes up about that one.”
She noted the government was also likely to use the objective as a point of differentiation from the opposition about the future of superannuation.
“Although the controversial Division 296 tax didn’t pass this year, the newly defined objective provides the government with a political edge in contrast to the coalition’s proposal to allow superannuation funds to be used for housing and other expenses,” she said.
“Housing affordability is shaping up to be a major topic as we head towards the next federal election so by emphasising preservation as the cornerstone of super, the government could argue using super for non-retirement purposes contradicts this objective and position itself as the defender of retirement savings.”
