The federal government announcement last week of its intention to implement the Financial System Inquiry (FSI) recommendation to have the purpose of superannuation enshrined in law has been met with a mixed reaction from the SMSF sector.
The SMSF Association welcomed the announcement and was optimistic about working with the government to shape the enshrinement.
“We have been a strong advocate of this important policy initiative, having argued its importance to the FSI and then endorsing the FSI’s recommendation to enshrine the primary objective, with a focus on the provision of retirement income as the quintessential focus of super,” SMSF Association chief executive Andrea Slattery said.
“It’s been our strongly held position that having a universally agreed primary objective is essential to bring stability to superannuation policy and help take it out of the budgetary cycle where it is at the mercy of the government of the day’s fiscal demands.”
Slattery added enshrining the objective of superannuation in law would help individuals focus on a long-term saving strategy and give them more confidence in the system.
The SMSF Owners’ Alliance reacted slightly differently to the government’s position.
While it thought the announcement was a positive move, nevertheless it insisted the purpose of superannuation as outlined in the FSI was too limited and should be extended.
The FSI stated superannuation’s primary objective should be to provide income in retirement to substitute or supplement the age pension.
However, the SMSF Owners’ Alliance suggested the goal of superannuation be defined as “to encourage every Australian to be self-reliant and able to maintain a standard of living in retirement that bears a reasonable relationship to that before retirement by way of fair, equitable and efficient tax incentives that recognise the inherent bias against savings in the income tax system”.
The lobby group pointed out the system should be fair in that the tax treatment of retirement savings should not be overly generous or inadequate, should be equitable for all members regardless of income levels, and should be equitable so as to achieve the right balance between allowable tax concessions and adequate taxation revenue to enable the desired outcomes to be achieved.