The draft legislation to define the objective of superannuation carries no enforceable provisions and no penalties to comply with it, but is framed in a way that could be used by governments to reduce tax concessions or decrease larger balances, according to a financial services lawyer.
Sladen Legal principal Phil Broderick said the draft legislation released on 4 September included a statement of compatibility that must be included whenever a bill or regulation related to superannuation was proposed showing how it aligned with the objective, but neither the objective nor statement were enforceable.
“The bill specifically states that ‘nothing in this act creates rights or duties that are enforceable in judicial or other proceedings’,” Sladen said in a recent blog post.
“What about failing to prepare or table a statement of compatibility? No, according to the draft legislation that will ‘not affect the validity, operation or enforcement of the act or any other provision of a law of the commonwealth’.”
He added there was also no legal force behind the legislation that was enforceable by courts or regulators, with the explanatory memorandum to the draft legislation stating the “Objective [of Superannuation] Bill does not create any rights or duties that are enforceable in judicial or other proceedings” and the same applied to the statement of compatibility.
“So in the end we have an obligation to prepare and lodge a statement that is not binding on anyone, provides no rights and has no consequences for failure to comply with that obligation,” he said.
However, despite the lack of enforceability, he noted the objective would be used as a basis to make changes to the superannuation system.
“When it was first proposed, 10 or so years ago, the objective was to be used as a shield to encourage governments to stop the continuing tinkering to the superannuation system. It could be said that this proposed objective could be used as a sword to encourage or justify future superannuation changes,” he said.
The terms ‘equitable’ and ‘sustainable’ were likely to be levers used to make changes highlighting that superannuation was inherently inequitable, he said.
“A system designed to apply a low tax on savings for retirement is always going to favour the better off in society. That said, equitable could also be used as a justification for introducing measures aimed at paring back tax concessions for superannuation and/or measures aimed at larger superannuation balances,” he said.
The same applied to the definition of ‘sustainable’ and efforts to have an economically and fiscally sustainable superannuation system could be used to justify similar changes, he said.
“So, while it creates no rights, it is intended to serve as a ‘true north’ for regulators and, therefore, could influence how they enforce other regulatory and taxation laws,” he said.
