Regulation, SMSFA, Superannuation

Objective needs clarification

Objective of superannuation

The proposed objective of superannuation requires more precise definition due to the presence of vague terms in the statement.

The exposure draft legislation to enshrine the objective of superannuation into law contains several subjective terms needing further clarification, according to an SMSF policy specialist.

SMSF Association (SMSFA) head of policy and advocacy Tracey Scotchbrook acknowledged the wording used in defining the superannuation objective may create confusion when shaping future super policies and the explanatory memorandum accompanying a future bill should provide clarity on the interpretation of these terms.

“When we look at what we’ve got in the exposure draft, the key words in the objective of superannuation are not defined,” Scotchbrook told attendees at an SMSFA webinar today.

“[For example], ‘dignified’ is an interesting definition and [the draft legislation] acknowledges itself the subjectivity around what dignified means to different people in different circumstances and different stages of life and how this concept may change over time.

“‘Equity’, like dignified, is also flagged as being a subjective term, but [the draft legislation] also goes on to say that it’s not the intention for all individuals to receive the same benefits.

“So the explanatory memorandum for this legislation, when it does come through, will be a very important statutory interpretation document as to what the objective means and how it intends to operate.”

To that end, she questioned whether the ambiguity of the terms contained within the draft legislation would effectively achieve the aim for which the objective was introduced.

“The objective of super was originally put forward to prevent the tinkering of the superannuation system and we had a period of time where we had sustained change coming through the superannuation regulation and the way that the rules apply,” she said.

“It was adding complexity and uncertainty and people in some instances were starting to disengage with super because of the persistent changes. It will be interesting to see whether the objective of super here achieves a similar purpose.”

Additionally, she noted the lack of legislative instruments contained within the bill meant the measure was not legally enforceable.

“It’s quite purposely set as a separate piece of legislation because its function is quite different from the compliance and regulatory framework. It’s not enforceable through the courts, it’s not enforceable against trustees, in fact, it’s not enforceable to government,” she said.

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