House debates

Monday, 18 March 2024


Superannuation (Objective) Bill 2023; Second Reading

2:43 pm

Photo of Kylea TinkKylea Tink (North Sydney, Independent) Share this | Hansard source

I want to start by making a very clear statement, and that is that in no terms, in no way should the superannuation savings of Australians ever be seen as a fund to be used by government for public benefit. Super is not a government bank. Super is everyday Australians taking responsibility for the ageing process and building capital behind themselves.

Occupational superannuation first emerged in Australia in the mid-19th century. Its purpose since then has changed substantially. It was initially seen as a tool that was available to just a select group of salaried employees, through to acting as a supplement to the age pension for mostly white-collar workers. Then, in 1992, the then Treasurer, the Hon. John Kerin, announced a new system, to be known as the superannuation guarantee, that would require employers to make superannuation contributions on behalf of their employees. The whole system shifted. If you worked—no matter where you worked—you had the opportunity to build a nest egg to ensure that when you stopped working at retirement age there was at least some capital behind you.

The reaction from the opposition at the time was exactly as we have come to expect: one that predicted it would be a disaster, leading to unprecedented levels of unemployment. Yet, interestingly, trawling back through the records of the debate at that time, there seems to be little true debate about the purpose of superannuation, and the legislation itself did not include a statement about the objective. It did, however, establish the sole purpose test that effectively requires superannuation funds to act for the sole purpose of providing retirement benefits to their members. It's pretty clear that it was to provide superannuation funds to act for the sole purpose of providing retirement benefit to their members.

And that brings us to now, 32 years later. I rise to speak today to the Superannuation (Objectives) Bill 2023—not to foretell of the potential for a disastrous outcome but to offer the thoughts of my electorate of North Sydney as to what debate on this sort of reform should seek to address and what questions remain to be answered. Given the speakers we've heard in just the last hour, as we've all stood, those questions remain even in the face of this draft legislation. While my community welcomes in principle the move to legislate a superannuation objective to prevent inconsistent changes to the superannuation system in the long term, it is imperative that any objective protects the ability of Australians to build their superannuation balances in line with their long-term ambitions, rather than simply empowering any government of the day to pursue their economic aims by counting on the billions of dollars in balances that are not theirs.

In this context, the bill raises several issues for my community. Firstly, it lacks a total income retirement perspective. While I believe finding an objective for superannuation could help create a shared understanding of the super system against which to judge any future policy settings, I would also argue the objectives should cover the entire retirement income system, including the age pension and related benefits. Secondly, the proposed definition includes several subjective terms not defined in the bill, and multiple stakeholders have raised their concerns about these with me directly. Finally, with no mechanism to ensure governments are held accountable to the definition, it is likely that this bill will ultimately achieve very little.

Ultimately, this bill is one of many pieces of legislation and proposed changes being suggested by this government that I fear will, in combination, risk undermining confidence in the super system. As we've seen in the past, governments can and will use the superannuation system to their advantage with little regard for its original purpose. For this reason, the creation of a central objective for superannuation may provide some greater protection. As we saw with the previous government, the super system was used by them to shirk their responsibilities during COVID, allowing people to access their retirement savings rather than supporting them. Effectively, that government forced people to choose between keeping a roof over their heads in the immediate term and having enough to comfortably retire on later—not a question that any 30-year-old can see with any perspective. Now, this current government is using the super system to fill a budget black hole by introducing a poorly designed tax on super earnings over $3 million, without indexing the threshold and including unrealised gains in the calculation of earnings, causing concern—particularly among those with land or business premises owned by self-managed super funds, such as farmers and small-business owners.

From a personal perspective, I believe any objective should help create a shared understanding of what the superannuation system is truly trying to achieve and it should provide certainty for the many millions of Australians who are doing the right thing by saving for their retirement. However, I believe that when you are talking about retirement planning, the current truth is that super is only one pillar of Australia's retirement saving system, which actually comprises compulsory savings through the superannuation guarantee and voluntary savings, including pre-tax and post-tax super contributions. Thus, any objective set for this channel must recognise that. The other pillars are the means-tested age pension, provided by government and guaranteeing a minimum safety net of income in retirement, and voluntary savings and other assets—such as financial assets and housing—that can contribute towards living standards in retirement. Yet I frequently hear from constituents about the problems created when these pillars do not work together to provide an adequate retirement. Indeed, at the moment I have one gentleman in my electorate who is struggling: he worked hard his entire life to pay off his apartment, only to find himself now not eligible for any sort of pension and trying to cover increasing strata fees. The system overall is broken, and a simple objective will not address that.

According to the explanatory memorandum:

1.38 The inclusion of Government support in the objective reflects the crucial link between superannuation policy and government support.

But merely including the term 'government support' in the objective does not go far enough in linking all the elements of the retirement system. In this case I believe it would be more worthwhile to set objectives for the retirement income system as a whole, guaranteeing a minimum standard of living and allowing policymakers to use a combination of policy tools—be that superannuation, housing policy, the age pension—and other mechanisms to achieve this minimum standard.

Secondly, the proposed definition leaves much open to interpretation. The bill defines the objective of superannuation in the following terms 'to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way'. You may not pick it up on first reading, but many stakeholders have expressed concern to me about key concepts within this objective, noting that these terms are subjective and open to interpretation. They are ultimately not defined within the bill. The terms 'preserve savings', 'deliver income', 'dignified retirement', 'alongside government support', 'equitable and sustainable' appear to mean different things to different stakeholders, creating potential uncertainty in the sector. It fails to leave us with peace of mind that the governments are safeguarding our savings.

Ultimately, uncertainty is being created within the sector, which is the very opposite of what we are hoping this legislation will achieve. Notably, the government chose not to change the proposed definition; it did not change it from its original form despite concerns about definitions being raised during the consultation process.

Finally, the proposed objectives lack enforceability. When tabling the legislation, the assistant minister, Stephen Jones, said:

This will make policymakers more accountable when considering changes that affect Australians' retirement savings.

But it's difficult to see how this will be the case when the objective lacks enforceability. The bill requires members of parliament who introduce the bill that proposed changes to the superannuation system to write a statement of compatibility explaining how the bill is compatible with the legislated objective of superannuation. Similar requirements are made of other regulations related to superannuation. But it does not create an enforceable right or duty. Statements of compatibility will not be binding, and there are no consequences for failing to comply with the proposed obligations. It doesn't include requirements like a formal assessment of compliance against the proposed objective or regular reporting of policy changes made against it.

According to the Law Council of Australia, a legislative purpose will not constrain future parliaments and therefore only represents a political, rather than a legal, restraint on future forms. So I cannot help but feel this bill will achieve little. At a time when so much seemingly needs to be addressed in our superannuation system, including the fundamental gender inequity built into the system and the need to balance the opportunity cost of lost income in a world where housing affordability appears to be the consistent economic challenge of this generation, this definition leaves us wanting—wanting inspiration, wanting true direction and wanting long-term confidence.

Concerningly, this reform is also just one of multiple changes to superannuation being suggested by this government, and the people of North Sydney are worried these changes are intended, in part, to drive people towards large superannuation and standardise products and away from self-managed funds. Indeed, the better targeted superannuation bill coming before this parliament shortly is a prime example of this push. In a radical departure from most of the income tax regime, where taxes are normally only assessed on realised gains, the better targeted super bill is riddled with problems, and while my community supports the overarching idea of reducing tax concessions through excessively large investment holdings, the proposal as it currently stands is far from equitable and is poorly structured.

It is, as I said earlier, a tax grab to fill a budget back hole. It means people who have been told for decades to hold any assets they don't need until retirement in their super will pay tax on them even though they haven't been sold. That income will not be refunded or paid back if their balance drops to below $3 million. Ultimately, without indexation, more and more people will be captured by a cap that has been set arbitrarily. It is simply not fair nor equitable that fund members have their savings eroded by thresholds that are not indexed or that people will be paying tax on assets they have not realised.

As in many other areas, increasing cynicism and a lack of trust mean that the relationship between government and the people is broken when it comes to super. Government is increasingly intervening in super, and I fear that skewing the system towards big funds and a one-size-fits-all approach won't work and won't allow for self-managed fund options. Australia desperately needs a retirement income system that guarantees a minimum standard of living for everyone, but I do not believe that legislating this objective for superannuation, with little regard for the retirement income system as a whole, will go far enough towards achieving that. With little enforcement mechanism, it is difficult to see that this bill will achieve much at all.


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