The objective of superannuation should provide a framework for government policy, but not detail the operations of the system or be used as a tool to push through short-term policies that may have long-term consequences, according to the SMSF Association (SMSFA).
SMSFA chief executive Peter Burgess said the association supported in principle the concept of a legislated objective of superannuation, but it would benefit from less red tape and fewer changes and should provide guidance solely for policy design and not instructions on the operation of the system.
“It is essential that the objective provides appropriate and necessary guide rails and a fit-for-purpose anchor for government policy. Tinkering and ad hoc changes should be actively discouraged,” Burgess said in support of the SMSFA’s submission to Treasury regarding the objective.
“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.”
The industry body noted the sole purpose test (SPT) already addresses the core purpose of superannuation and serves to apply compliance measures and taxation concessions, but it must remain separate from the objective, which would sit above the operative provisions contained within the test.
Burgess added the SMSFA believed the objective alone would be inadequate and requires clear definitions, legislative design, operative provisions and guidelines to avoid poor policy design and outcomes.
“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,” he said.
“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.”
The association’s submission also noted superannuation was part of the larger retirement income system, a point highlighted in the final report of the Retirement Income Review, which examined super’s interaction with the age pension, personal savings and home ownership.
“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,” it said.
At its recent national conference, outgoing SMSFA chief executive John Maroney called on members to provide input to the consultation process, which closed at the end of March, highlighting the issue had been on the table for nearly a decade.
Conversely, the Institute of Financial Professionals Australia has rejected the proposed objective, arguing governments would not be bound by it and could disregard it, and the SPT could be fine-tuned to achieve the same outcomes.