Allegra Spender (Wentworth, Independent) Share this | Hansard source

I rise to speak to the Treasury Laws Amendment (Supporting Choice in Superannuation and Other Measures) Bill 2025. While I will not oppose this bill, I want to raise concerns I have with schedule 2 of this bill, which could result in less, not more, choice in superannuation products. Reduced competition in superannuation has a hidden cost for all Australians, and we need to be alive to these risks when making what we may think on the surface seems like a no-regrets change—and there are other issues we have had in, for instance, making things like the performance test. Some of those changes we have made in those areas have ended up reducing choice or reducing dynamism in the super industry.

We need to be much more alive to unintended consequences, which is why I have a second reading amendment to this bill. I move the amendment circulated in my name:

That all words after "whilst" be omitted with a view to substituting the following words:

"not declining to give the bill a second reading, the House:

(1) affirms the objective of superannuation is to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way;

(2) notes that:

  (a) while advertising of superannuation products has led to poor outcomes in some circumstances, advertising does and should continue to play an important role in fostering competition and driving innovation among superfunds;

  (b) while Australians are often disengaged with their superannuation fund, efforts to legislate additional consumer protections in response to this disengagement can unintentionally weaken competition between funds; and

  (c) any weakening in the competitive pressures on superfunds to maximise net returns for customers also has a hidden cost to the retirement balances of account holders; and

(3) calls on the Government to acknowledge this policy tension and commit to reviewing this and other legislative measures for the individual and cumulative impact on fund incentives and performance".

This bill has seven schedules. While I will not go through each schedule in detail, I note that, on balance, there are positive measures held within the bill, but I also note it is quite inappropriate to include some of these schedules as one bill, because they are not the same thing. It means it makes it difficult to support some bits and not other parts.

I'm pleased to see schedule 5 lists six new deductible gift recipients, including in particular some organisations that I've worked with—in some cases, I even supported their DGR status—including Equality Australia, the Great Synagogue Foundation and the Parenthood Project. This represents important recognition for these organisations and for the philanthropic work that they do. Similarly, I note that schedule 6 increases the rebate claimable by wine producers from wine equalisation tax in an effort to provide additional support to Australia's wine industry, and I support these measures. But schedules 1 and 2 are the most consequential changes and the ones for which this bill gets its name.

Schedule 1 amends the Superannuation Guarantee (Administration) Act to allow an employer to request information about an employee's stapled superannuation fund from the ATO if the employee has not selected a product during onboarding. This is an important change that will make it a little bit easier for employers to act in the best interest of their employees by identifying their stapled superannuation product rather than creating duplicated funds when a default is not provided as part of the ongoing onboarding process. Duplication of superannuation products costs Australian workers millions each year—with more than four million Australians holding more than one superannuation account. The more that we can do to minimise unnecessary and unintended duplication is a positive step forward.

Schedule 2 puts a ban on advertising superannuation products during the employee onboarding process subject to certain exemptions. This change has come about after a series of cases in which employers were found to be directing new hires towards underperforming financial products to which the employer had a relationship. Perhaps the most high-profile case of this was MYOB, who was accused in 2023 of directing employees towards an underperforming high-fee fund with the option to stick with their existing fund buried in the fine print. The intent of this schedule is therefore not without cause. We know that many Australians are generally disengaged with their superannuation—perhaps even more so than usual at the point of starting a new and exciting career opportunity. When clicking through the often lengthy onboarding processes, many of us will take the path of least resistance. The tendency can and has been exploited.

But some in the industry and I are concerned that this legislation will have unintended consequences that, in fact, lessen competition in the sector—not strengthen it. Advertising may have certain negative connotations in today's highly commercialised environment, but the ability to advertise is an important mechanism for new products to break into markets and to disrupt the landscape. Without the ability to advertise new products, incumbents can become easily entrenched, and, without constant competitive pressures, performance and consumer outcomes can weaken. While many Australians are disengaged with super, we should not simply take this as an accepted fact. The start of a new job could be an important opportunity for Australians to re-evaluate their retirement savings options. To the extent that we can, we should be encouraging Australians to be engaged. Actually, it is an area where I think it would be appropriate to be spending government money in terms of advertising—perhaps much more so than other government funded advertising campaigns. Advertising, more broadly, has a role to play in this.

Obviously, we don't want this to be used as an opportunity for employers to cross-sell conflicted products, but a blanket ban, as was originally canvassed, is not a viable option, because the obvious beneficiaries of a blanket ban are default funds. It is estimated that about 60 per cent of Australian super fund members are invested through a default super fund option that was selected by their employer—often their first employer. But, even if these funds were a good option at the time, there is no guarantee that performance is sustained. In 2022, ASIC reported that nine of these default products were failing the performance test, which impacted about 800,000 members according to Morningstar. If we put a blanket ban on the advertising of products when onboarding, there is one less opportunity for consumers to assess their current fund and adjust their choices if necessary.

In response to this feedback from industry, the government has made certain exemptions to a blanket ban. For example, in the minister's second reading, he advised that advertising would be permitted if the advertised product was (1) the employees stapled product as confirmed by the ATO, (2) the employer's default product or (3) a MySuper product that meets certain requirements, including passing the annual performance test. These are sensible changes and the legislation requires advertising of new products to be accompanied by information about current stapled products to highlight the benefits or lack of benefit in switching products. But, as the FSC points out, the explanatory memorandum outlines that showing stapled products requires collecting information from the ATO commissioner, which adds an administrative barrier to finding stapled products.

Currently, onboarding platforms are able to use third-party verification services to find stapled products through fund information rather than the ATO. This process is often faster, but can admittedly be less reliable. The FSC is concerned that making the ATO the single source of truth will result in administrative delays that mean, in effect, only default funds will be shown under these exemptions. This, I believe, is not the intention of the bill. So, while I accept that this bill has good intentions, I accept that there is some scope for this bill to create unintended consequences, and I think this is the piece that is really important for the government to measure, keep pursuing and keep an eye on. If it does have these unintended consequences then the government will have to swiftly act to change this. It will take time to implement, but this is important in assessing the effectiveness of this bill.

But I would like to talk to the broader cumulative impact of some of the super reforms that have been put forward in this place over the past few years. Superannuation policy constantly grapples with balancing consumer protections for a relatively disengaged cohort of Australians and the important point of driving competition. I am concerned that the cumulative impact of superannuation policy, including the performance test, which the Treasurer has recently agreed to review and which I think is really important to review—not to remove the performance test but to minimise the unintended consequences of reducing competition and innovation, which I do believe the performance test does at the moment—has created less competitive pressures on funds to outperform and to deliver for their clients. This has a cost, albeit hidden, and I'm concerned that this legislation may add to that cost.

I do want to argue that this should worry us all. Australia has an extraordinary amount of our resources in superannuation—$4 trillion. It's absolutely remarkable. We have one of the biggest pension pots in the world in that cumulative fund. We have some of the biggest pension funds in the world in this small country of ours while only having 27-odd million people. But the issue really is that we need those funds to be as competitive as possible with each other if they are going to be using that $4 trillion worth of Australian assets. That is over 100 per cent of our GDP, so what that money is doing really matters if that money is going to be used for, firstly, the greatest benefit of the members and, secondly, making sure that it is actually serving the country as well. The sole object of superannuation is, frankly, to earn returns for members, and I'm never going to violate that principle, but I do recognise that, with that big asset pool, in some ways a super fund has an enormous impact on our economy. That impact, through different pieces of legislation, can be more or less positive both for the members and for the funds.

I want to draw your attention to a particular example: super funds' investment in innovation. You would think that, with the high level of superannuation funds and pension funds available, Australian super funds would be investing in innovation in Australia, particularly given that VC funds and PE funds have been shown to significantly outperform the ASX and more traditional listed areas. However, what we have seen is that super funds have reduced their exposure to innovation and particularly VC and PE over recent years. Members of the industry—the VC-PE sector—have told me that, in the last five years, the major super funds have not invested in a new VC fund over that period of time. So the super funds are investing in the ones they're used to, but they're not actually investing in the new innovation in the VC and PE area. I think this should be concerning us because who is funding innovation? I think these sorts of industries are perfect assets for super funds in the sense that they are long duration and need patient capital but also have the opportunity, with good ones, to earn really extraordinary returns. So they should be the place, but they're not currently. It's why I've been pushing—and I really respect and appreciate the Treasurer being open to looking at Your Future, Your Super and ASIC and at expanding ASIC's review of RG 97 to include funding for innovation. But I do think this is the stuff that we need to beware of in some of this. We are trying to protect consumers, but, if it ends up that we are just entrenching providers that do not really have to show their worth to consumers and that are not subject to strong competition, we will be doing a disservice to all the people who invest across our country in these superannuation funds. That is the piece that I think it is really critical for the government to be monitoring as it brings in these sorts of changes.

Finally, I urge the government to deal in good faith with the Senate inquiry process and commit to waiting for this review to take place before pushing this legislation through the Senate. I would actually say it would be great if the Senate inquiry could be done before this legislation is once again pushed through the House, because it is hard to vote on legislation without having the full information. But that is literally the modus operandi of this government.

I support the intent of this bill, and my feedback has been that the Assistant Treasurer has done a great job of engaging with industry and really being incredibly consultative. That doesn't surprise me at all, because I think that's been his approach across many different areas. But I do think there is a danger here, and I do think it's important to make sure that this bill does actually strengthen consumer outcomes and we don't lessen competition. We need to be very careful that this bill actually lives up to its title, which is improving choice in superannuation.

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