House debates

Monday, 18 March 2024


Superannuation (Objective) Bill 2023; Second Reading

2:04 pm

Photo of Zali SteggallZali Steggall (Warringah, Independent) Share this | | Hansard source

I rise to speak on the Superannuation (Objective) Bill 2023. I must admit from the outset that I'm sceptical about the usefulness of this bill and suspect an ulterior motive from the government. The government has not laid out a clear or cogent case as to exactly why this bill is needed and why it is needed now. I would like to see further clarity from the government on this point: why this bill, and why now?

Australians now have some $3.5 trillion invested in super. Australia's superannuation system is highly regarded around the world, despite decades-long political battles between the two major parties in this place and an astonishing lack of consensus that many of my constituents are very sick of. The Melbourne Mercer global pension index ranks the Australian retirement system third in a field of 37 countries. The main message is that Australians should be comfortable and secure in their twilight years, still living a great life. Super is an integral part of that. But there is always room for improvement in our superannuation system, and, sadly, this bill doesn't do that. Many in the Warringah community are sceptical of the government's recent moves on super. Their plans have been based on the rules and objectives already in place. Instead, we have a bill in front of us today that seems to be a solution in search of a problem. Surely we could use our time in this House more effectively to address the existing inequities in our super system.

What does this bill do? It seeks to place into law:

The objective of superannuation is to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way.

The bill requires policymakers to assess future changes to superannuation legislation for compatibility with the objective and include a statement of compatibility with the objective in explanatory materials.

Although the words 'dignified', 'equitable' and 'sustainable' appear to be relatively anodyne, they are open to interpretation. What exactly is meant by these words and putting them in the legislation is very unclear. Leaving it open to interpretation is bad legislation and bad policy. The bill is not clear or specific. It is capable of varying interpretation and has the potential to conflict with existing provisions in the superannuation legislation.

The explanatory memorandum to this bill states that the superannuation system is an important source of capital in the economy which can support investment in capacity building areas of the economy where there is alignment between the best financial interests of members and national economic priorities. This suggests potential tension between the role of the superannuation trustee, whose duty is solely to members of a fund, and those who decide national economic priorities. This seems to be the government wanting to get its hands on superannuation funds.

The apparent intention of the bill is that future actions, either legislative or those delegated to policymakers in law, consider and take into account the purpose of superannuation as set out in this bill—that is, that it look at the best financial interests of members and this idea of national economic priorities. What exactly should happen when those two clash? And, however, the recent antecedents to this bill suggest its purpose is backward rather than forward looking.

The Treasurer has stated:

The last decade saw the former government raid the superannuation system for its own purposes with a devastating impact on the savings of millions of Australians. Legislating an objective of super will help prevent this happening again.

I disagree. It will have no such effect. In this bill, the government proposes to replace one form of political gamesmanship of the superannuation system with another. This bill is window dressing masquerading as proper, well-thought-out law. I will be opposing this bill, and I note a number of key stakeholders oppose this bill.

The Institute of Chartered Accountants, the Institute of Financial Professionals Australia and the Institute of Public Accountants made a joint submission on this bill. They rightly note that the sole purpose test for superannuation has been codified over the last 40 years and provides that superannuation must meet core tests. Therefore, this establishes the objective of super. It's worth reminding the House exactly what that is: the core purpose is the provision of retirement benefits after 65 or death benefits if death occurs before retirement. Ancillary purposes are: benefits on termination of employment; benefits on ceasing employment due to mental or physical ill health; death benefits to a member's private legal representative or dependants if a death occurs after retirement; or any other purpose that the regulator approves in writing. These organisations argue that a far better approach is to amend the sole purpose test if the government wishes to change objectives of superannuation.

This bill should be taken back to the drawing board, and I encourage the government to do just that. Chartered Accountants Australia and New Zealand, the Institute of Finance Professionals Australia, the Institute of Public Accountants and CPA Australia suggest that the government should create an objective for the entire retirement system—this would include housing, the age pension, superannuation and savings outside superannuation—rather than focus solely on superannuation. I suggest that this is where the government should start: state a clear and practical vision for the entire retirement system and then define the objective of superannuation consistent with this. The security of those in retirement is too important to be the subject of constant political point scoring. If the government were to first state a clear vision for the entire retirement system, it would open a conversation with the Australian people that might achieve a bipartisan approach to the objective of superannuation within the broader framework of retirement security that is more balanced and future focused.

Finally, I encourage the government to continue to expedite the work towards a more equitable super system for women. The recent announcement that from next year superannuation will be payable on government paid parental leave is welcome. Modelling by Equity Economics shows that if an average Australian woman had the same rate of workforce participation after having children as that of a woman in Sweden, for example, she would retire with an extra $180,000 in superannuation. To put it more starkly, a recent report from the Super Members Council found that women today are expected to retire earlier and live longer than men but currently retire with a third less super. The same report found that paying super on the paid parental leave scheme would leave a mother of two some $12,500 dollars better off at retirement and therefore would make a meaningful reduction in the gender super gap which currently sits at around $50,000. But this is still very modest.

Another barrier noted in the report are the changes to the low-income superannuation tax offset which currently finds those earning less are taxed more heavily on their superannuation. Women make up the majority of low-income earners, but the full tax refund on super guarantees currently only covers those earning up to $37,000. Women constitute only 38.4 per cent of all full-time employees in Australia, while they make up 68.5 per cent of the part-time and casual workforce. Modifying the threshold to $45,000 would boost the super of more than 1.2 million Australians by an extra $500 million in the 2025-26 financial year alone; 60 per cent of these individuals are women.

There is also work to be done with First Nations people to improve their retirement outcomes and access to superannuation. The 2020 Retirement Income Review found that many First Nations people were likely to have either no superannuation or low super balances, much lower than non-Indigenous Australians, at retirement. We need to give more focus to these issues as policymakers, particularly as we look to close the gaps on so many fronts, many of which the government and the opposition continue to fall short on.

This is the sort of policy change that the government should be bringing forward to debate to help improve the superannuation system, particularly for women. We can't forget what the super system is meant to be—a retirement that allows the eldest among us to live out their twilight years in dignity—and so I urge the government to rethink their approach.

2:13 pm

Photo of Jerome LaxaleJerome Laxale (Bennelong, Australian Labor Party) Share this | | Hansard source

The narrative of superannuation in Australia reads like a cyclical tale of progress met with resistance. At its core, the history of superannuation is a story of a visionary policy introduced by a Labor government which has, predictably, faced opposition and resistance from the Liberals since its inception. This pattern has recurred through the decades, shaping superannuation into what we have today.

The Hawke Labor government recognise the fundamental need for a system that ensures Australians can retire with dignity, a system where workers' lifelong contributions are acknowledged and preserved for their retirement years. This government acknowledges the work of past Labor governments to establish this world-leading retirement program that we are fortunate to have today. This Labor government continues to honour that work, and we recommit ourselves to the intentions of the Hawke government: that super exists to fund a dignified retirement.

A dignified retirement is something everyone has a right to. We are wealthy country, and after a lifetime of work Australians shouldn't be broke at retirement, so we need to ensure that super serves for retirement. But what we have seen from the Liberals, the original opposes of super, is that they continue to seek to undermine it. You see, they can't get rid of superannuation, so they continue to try and chip away at it.

The member for Warringah asked why this bill is necessary. This bill is necessary because we need to stop stupid ideas eroding our retirement savings, because we have seen the Liberals enact policies that risk retirement savings' long-term security and growth. We saw the Liberals, against sound advice, allow people to raid their super during the pandemic. This was a policy which encouraged people to fund their personal pandemic response with their own retirement savings. An estimated $38 billion of early withdrawals was allowed during the pandemic. It's been estimated that this will end up costing super fund members $85 billion in retirement. It will also cost every taxpayer. Modelling released very recently by the Super Members Council shows that the early release of super scheme enacted by the Morrison government will mean a higher reliance on the age pension and lower tax from superannuation, which will hit $2½ billion per year from taxpayers by the mid-2060s.

Disgustingly, this Morrison government policy hurt young people the most. It wiped out super balances and will stop young workers receiving the benefits of compounding interests right into retirement. According to the analysis, all of today's 20-year-olds are projected to pay about $3,000 more in tax to cover the high pension bill caused by the Morrison government's scheme. In an example of a 30-year-old who withdrew the maximum $20,000 from super during the pandemic, they will have $93,600 less at retirement, leaving the member dramatically worse off in their lifetime. That's one person projected to lose nearly $100,000 in retirement because of the Liberal's ideological opposition to superannuation for retirement. Bad policies on super lead to bad outcomes in retirement.

Now we see the Liberals doubling down on their continued attacks on superannuation. Despite their super for homes policy being ridiculed in the final days of the 2022 federal election, they have shockingly recommitted themselves to this policy blunder under the Leader of the Opposition. They want Australians to fund the housing crisis from their own super. They've got no interest in fixing the housing crisis through good policy; they instead want young people to use their retirement savings to fix their policy mistakes. Instead of supporting the Housing Australia Future Fund, they want people to use their retirement savings. Instead of supporting the Help to Buy scheme, they want renters to eat into their nest eggs.

With around 16 million Australians holding a superannuation account and the total value of funds under management now exceeding $3.6 trillion, it's clear that Labor's super system plays a critical role in our economy and the lives of every citizen. Everyone—bar the Liberals, seemingly—knows the system's success hinges on its protection from shortsighted policies. Proposals like those put forward by those opposite in the past and the present will hurt young workers and jeopardise their retirement. That's why we need this bill.

But don't just take my word for it. Let's delve into the history books and see what the Liberals have said about their own policy. In 2017, the current opposition leader criticised super for homes for potentially fuelling housing prices and worsening the crisis. The current shadow finance minister echoed this sentiment, warning it would likely push prices up, not down. Even the deputy opposition leader highlighted the vital need for superannuation in retirement, not as a bandaid for housing market pressures. Despite knowing all this and, in some cases, even publicly acknowledging it, they still resuscitate this old, lifeless plan with the complete understanding superannuation relies upon compounding interest and is designed to secure a comfortable retirement for workers, not to serve as a bandaid for their policy failures.

Our government understands the importance of a secure and robust superannuation system. The Grattan Institute's analysis reinforces our stance, showing that allowing early access to superannuation for home deposits would do little to improve homeownership rates, particularly for younger and less affluent Australians. For those in the 20-to-24 age group with average super balances of just over $15,000, the impact of their ability to enter the housing market would be minimal. However, the long-term consequences for their retirement savings could be severe.

This is just the latest in decades of efforts to threaten and undermine superannuation. John Howard in 1996 pledged to continue with the scheduled increase to the superannuation guarantee; however, he did not. Tony Abbott's tenure as Prime Minister saw a similar pattern of promise and retraction. Leading up to the 2013 election, the Abbott government committed to increasing the superannuation contribution, and that was also an unkept pledge.

Of course, we've mentioned the access to super during the COVID-19 pandemic. In 2019, while they opened up access to superannuation and continued to collect a 15.6 per cent superannuation rate, they were fighting internally about whether to break the Morrison government's commitment to increase superannuation of ordinary workers to 12 per cent by 2025. These episodes in history have not been just one-offs; they've not been missteps; they reveal an insight into the ideological opposition by the Liberals to superannuation for retirement. Their approach, characterised by broken promises and policy reversals, undermines the stability that is essential for effective retirement planning. It sends a message of uncertainty to workers and retirees alike, who question the reliability of superannuation as a pillar of their retirement strategy.

So, in this context, our government's commitment to protecting and strengthening superannuation becomes even more critical. This bill seeks to correct past missteps by enshrining into legislation a clear, unambiguous objective for superannuation. It's simple and it matters. The objective is that super should exist to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way. This should not be controversial, because this is, in essence, what superannuation is all about. It is a means to ensure that, after a lifetime of work, individuals can retire with dignity, supported by their savings. We are proposing to stabilise the superannuation objective by ensuring that any legislative changes are evaluated for their alignment with the core objective of superannuation, fostering transparency and accountability in policy-making.

This bill also seeks to reflect a broader understanding of superannuation's role in our economy and society. It acknowledges that superannuation is about individual savings and its collective benefit to the Australian economy. With approximately $3.6 trillion under management, superannuation is a significant source of capital, driving investments in infrastructure, innovation and sustainable development. It is an explicit declaration of our government's commitment to safeguarding the retirement future of millions of Australians. By legislating the objective of super, we are protecting individual savings and reinforcing the system's role in our national economy and society, because superannuation isn't just financial support; it's a guarantee to safeguard our future and a commitment to Australian workers and a legacy for our children and grandchildren.

The challenges and debates regarding superannuation policy are complex, but the objective should not be controversial. It should remain simple and unchanged: to provide for a dignified retirement. Those opposite have repeatedly proved that, whether it be on housing, climate change, Medicare or, of course, super, they just aren't committed to making the choices that will deliver long-term support, security and prosperity to Australians. Thankfully, we have a government that is always committed to supporting superannuation in Australia. I commend this bill to the House.

2:24 pm

Photo of Zoe DanielZoe Daniel (Goldstein, Independent) Share this | | Hansard source

Superannuation is a manifestation of our nation's commitment to the principles of its founding: a fair go, secure quality of life and a dignified retirement for all Australians. The program was designed with a vision that every Australian, after a lifetime of contributing to the fabric of our society, could look forward to their retirement with confidence. It's a promise from the present to the future, a modern safeguard against the human uncertainties of old age.

The value of our superannuation program extends beyond individual security; it's also about societal stability and economic foresight. By ensuring our citizens have adequate funds in retirement, we're not only safeguarding their individual futures but also securing the health of our economy. We're enabling more people to manage their own retirement in the way they wish, with sufficient resources to do so. It provides them with choice. At the same time, we're reducing pressure on the budget by ensuring that fewer retirees have to resort to the pension.

Superannuation has a stabilising effect on financial markets, enables public spending elsewhere and provides a massive pool of investment capital for the nation. This pool is the fourth-largest holder of pension fund assets in the world, now amounting to at least $3.5 trillion, and provides Australia with influence and leverage in international capital markets.

Today, the House has the opportunity to codify the principles of our superannuation system, and by extension many of the underlying principles of our national identity, into law. I will vote to take this opportunity to help to entrench a dignified retirement for all living Australians now and those to come.

This action is necessary because the integrity of Australia's superannuation system is not futureproof. We've seen clear intent from governments of the very recent past to get hooked on the idea of encouraging the opportunistic withdrawal of savings in superannuation accounts, often to pay for overt policy failures. Housing supply and the resulting lack of affordability is one example, and I'll come back to it in a moment.

The authorisation of the early release of superannuation savings during the COVID-19 pandemic was another example. In 2020, up to three million Australians withdrew a total of $38 billion from their super balances early. Research by Tristram Sainsbury at the Australian National University, among others, found that an Australian who withdrew $10,000, the maximum permitted, may well have lost $120,000 by the time they reach retirement. The evidence is that those aged between 25 and 35 who withdrew early reduced their balance by fully 51 per cent. It is money gone, reducing what will be available to them during retirement and therefore the opportunities available to them later in life.

The implications of this policy will resonate into the future, but it also had an immediate, observable social impact. There's a strong correlation between those Australians most likely to access their superannuation early and financial disadvantage. Those on lower incomes who withdrew some of their super were more likely, on average, to increase their spending on gambling, for example.

On housing, homeownership is a persistent and worsening policy challenge for Australia—one that is also central to our national identity. House prices have soared to record highs. But accessing superannuation to solve this problem is not good governance. The former government's super home buyers scheme is another example of the seductive opportunism and indeed populism of policy of this nature. Evidence suggests that such a scheme would merely push up house prices, with the likely small balances accessed immediately chewed up and replaced with debt. It's also possible that such a scheme would limit the mobility of Australians who accessed it, discouraging them from moving away for a new job or into a bigger dwelling to start a family, for example.

We also know that superannuation provides security for women and drawing on it early exacerbates financial fault lines that cut across genders. Across every age group, men consistently have considerably more in their superannuation savings balances. Early access to super during the pandemic therefore widened the retirement savings gap between men and women. As a result, more women will retire with less security, more women will retire with less independence and more women have a less certain future. These are the social and structural impacts of policy which undermines our superannuation system, and I will vote to ensure that this mistake will not be repeated.

I would add very clearly that this policy was the brainchild of my predecessor, the former member for Goldstein. I opposed it before the 2022 election for the reasons that I have just outlined, and I continue to wholeheartedly oppose it now. Structural housing policy failures by successive governments, state and federal, should not be handballed to holders of limited superannuation in the form of the disastrous idea of encouraging people to deplete their retirement savings. It's far better to encourage and foster additional, voluntary super contributions, plus investment earnings on the deposited amount, which can be later withdrawn to help you pay for your first home. The money you contribute to your super grows based on the super investment mix you've chosen. That I agree with, and it should be extended, too, with women being allowed to make extra contributions to top up their super without a tax penalty when they've spent time out of the workforce. That's something that I'm working on with the Treasurer.

This bill requires all new legislation presented to parliament and all new regulations developed by the executive branch to provide a statement of compatibility to explain how the item is compatible with the principles and social objectives of superannuation. This is a sensible and modest provision to safeguard both the material circumstances of Australians in their retirement and the basic founding pillars of our social fabric, and for this reason I will vote for this bill.

2:31 pm

Photo of Cassandra FernandoCassandra Fernando (Holt, Australian Labor Party) Share this | | Hansard source

I rise to support the passage of the Superannuation (Objective) Bill 2023, a crucial piece of legislation aimed at enshrining the fundamental purpose of superannuation into law. As we meet here today, it is important to acknowledge the role of the Labor party in championing superannuation as a fundamental right for every Australian worker.

The history of superannuation in Australia is deeply entwined with the Labor movement's tireless advocacy for the working class. For decades prior to the establishment of a formal superannuation scheme, the welfare of retirees often depended on negotiated agreements between labour unions and employers. However, it was the vision and determination of the Labor party that led to the creation of a comprehensive superannuation system designed to provide security and dignity in retirement for all Australians. The pivotal moment came in 1983, with the Prices and Incomes Accord, a historic agreement between the government, businesses and trade unions. This marked the beginning of employer contribution to superannuation funds, a groundbreaking initiative aimed at promoting self-funded retirement savings and reducing reliance on publicly funded pension systems. Despite initial resistance from small-business groups, the introduction of compulsory superannuation was a triumph for working Australians, ensuring that all employees had access to secure retirement savings.

The Hawke-Keating government had a vision for a three-pillar approach to retirement income—comprising compulsory employer contribution, additional voluntary contribution and a means-tested government-funded age pension—that would lay the foundation for a robust and sustainable retirement income system. In 1992 this scheme was complemented with the superannuation guarantee, ensuring that all employers had to contribute a set amount on top of their employee's salaries. When former Treasurer Dawkins introduced the Superannuation Guarantee (Administration) Bill 1992, he noted that one of the objectives of the superannuation guarantee was to extend coverage to those who did not have it. He stated:

Superannuation was the preserve of a few, mainly the wealthy …

The reform of superannuation has been one of the great achievements of the Government. Over its term of office, the Government has greatly expanded access to superannuation savings. In particular, award superannuation has fostered the spread of superannuation to large areas of the work force which previously had no cover.

This scheme has been a huge success, placing wealth in the hands of working Australians on a scale not seen around the world, reaching an estimated $3.5 trillion in 2023.

Subsequent governments have contributed to the evolution of the superannuation system, gradually increasing the superannuation guarantee rate and introducing reforms to improve portability and performance. Superannuation moves people off the age pension, lowering future government payments and ensuring that as the population ages the government can still afford to provide vital services. In the UK, spending on the pension accounts for 5.1 per cent of GDP. In Australia, because of our superannuation system, spending on the age pension is only 2.3 per cent of GDP and is expected to fall even as the average Australian gets older.

Australia boasts a world-class superannuation system which has been admired by countries around the globe. However, over the past decade superannuation policy has been marred by confusion, costliness and chaos. We have witnessed the detrimental impact of short-sighted decision-making, including the raiding of superannuation funds for purposes unrelated to retirement savings, resulting in significant losses for millions of Australians. Because of the choices of the previous Liberal government, around $36 billion in savings were drained out of super accounts in a matter of months. A 35-year-old who withdrew $10,000 under the COVID early-release scheme—a third of average savings for someone that age—will be over $150,000 worse off in retirement. And 600,000 young people under the age of 35 who made this decision now have no super at all.

At every opportunity, the coalition chooses to use workers superannuation to bail itself out of difficult and important policy decisions. Underscoring this is that while opposing paid family and domestic violence leave the Liberals were in the process of drafting legislation that would have forced women fleeing violent relationships to access their superannuation to fund their escape. Now the Liberal Party wants to raid your retirement savings again so that you can afford a home. These decisions, once again, align with the Liberal Party's policies to bury their heads in the sand and rob from the next generation.

That is why I stand today to support this bill. Rather than thinking of the short term, we are here to outline a long-term vision for our great nation. Despite its central role in the retirement income system, there is no agreed objective of superannuation to serve as a guide for policymakers. The primary object of this bill is to define the purpose of superannuation so there is long-term assurance to the system. We have set forward a simple objective for the system to preserve savings to deliver income for a dignified retirement alongside government support in an equitable and sustainable way. This clear and concise objective will serve as a guiding principle for all stakeholders, fostering greater confidence in our superannuation system. By legislating an objective for superannuation, we aim to prevent mismanagement and ensure that the focus remains squarely on the long-term interests of members. This objective will safeguard the integrity of the superannuation system, reaffirming its commitment to providing a dignified retirement for all Australians. It will ensure that snap decisions of a government will not lead to a generation of Australians missing out.

This bill will secure the future of superannuation by embedding its purpose into law, thereby ensuring that any future changes to the system are aligned with this overarching objective. Ministers will be required to justify proposed changes to superannuation to parliament, considering this legislated purpose. This will ensure accountability and transparency in decision-making processes that impact Australians' retirement savings. Importantly, the objective outlined in this legislation does not absolve superannuation trustees from their existing obligations. Trustees will continue to be bound by their duty to make investment decisions in the best financial interests of their members. Additionally, members will retain the ability to access their superannuation on compassionate grounds or in cases of genuine financial hardship. As more Australians than ever before approach retirement age, the imperative of enhanced retirement incomes has never been more pressing. This bill represents a crucial step towards strengthening our superannuation system for the next generation, ensuring its resilience and effectiveness in supporting retirees.

I am pleased to note the strong support for this bill from industrial stakeholders, whose engagement has been invaluable throughout the legislative process. The ACTU wrote in its submission that it 'is pleased that the government has considered the objective of superannuation from first principles' and proposed an objective which would go closer to the originating purpose of superannuation.

It is predicted that by 2035 the superannuation system, currently worth $3.5 trillion, will outstrip the Australian banking sector. This will see superannuation playing a significant role in contributing to the strength of our financial markets. There are opportunities to leverage its national economic priorities while aligning them with the best interests of members.

Already, the superannuation sector invests in vital long-term assets such as toll roads, electricity grids, airports, hospitals, housing and ports. Just this week, former federal Treasurer, Wayne Swan, chair of Cbus, made a commitment for super funds to have a substantial role in building 40,000 affordable homes to help fix the nation's housing crisis. He stated:

… We are confident that investment in the social housing sector has the potential to be a win-win for our members—by providing stable long-term returns for their super balances, as well as construction industry jobs …

This is the long-term vision we need for super: to provide a dignified retirement for Australians, to support working-class Australians to build wealth and to invest in our country's future.

This bill marks a pivotal moment in the ongoing evolution of Australia's superannuation system. As custodians of this pivotal pillar of our social and economic infrastructure, it is upon us to protect and enhance it for the benefit of current and future generations. I am proud to stand before you as a member of the Labor Party, which plays a pivotal role in building and safeguarding Australia's super system.

In conclusion, superannuation stands as a testament to the Labor Party's commitment to advancing the interests of the working class and promoting economic fairness and social justice. As we reflect on the history of superannuation in Australia, we must recognise it as one of the great achievements of the Labor Party movement, ensuring that all Australians can retire with dignity and security. Let us continue to work together to ensure that it remains a cornerstone of retirement security for all Australians.

I extend my gratitude to the Prime Minister and the Treasurer for their work on this bill. I commend this bill to the House.

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.

2:55 pm

Photo of Steve GeorganasSteve Georganas (Adelaide, Australian Labor Party) Share this | | Hansard source

I rise in support of the Superannuation (Objective) Bill 2023, an important bill that gives us an objective for what superannuation is and should be and what its aims are. Of course, superannuation was brought in by the Labor government, the former Hawke-Keating government, back in the nineties. It was meant to preserve savings for workers—people on wages and in businesses—to allow them to retire in dignity with a bit of income. It is an important Labor reform that was introduced in the mid-nineties, and it's something that this side of the House has supported continuously because we know the importance of ensuring that people who are working have some savings in their retirement to be able to live with dignity. This bill introduces an objective to ensure that it serves as a guide for different governments of all persuasions when they come into this place to make decisions for regulators, industry and the wider community. We know that superannuation is important, and we know that it is one of the mechanisms that we have to ensure that people have an income or some savings when they retire.

Recently I spoke with a constituent in my electorate who had received superannuation payments only twice in the span of 18 months of work. He was relatively young and is already facing financial hardships due to the absence of these contributions towards his retirement savings. This is certainly not within the scope of what superannuation was meant to be. He is currently grappling with the challenge of reclaiming what is rightfully his. Despite his young age, the lack of provided superannuation will significantly affect his future, and he is a sad reminder of why it's important to preserve savings to deliver income for a dignified retirement. This must be done alongside government support in an equitable and sustainable way.

The introduction of the Superannuation (Objective) Bill 2023 by this government marks a significant legislative effort. The primary intent of the bill is to establish a clear and precise objective for superannuation within the legal framework. It is meant to serve as a guiding principle for future governments, regulatory bodies, industry stakeholders and the broader community. Every Australian needs to be able to rely on their super after years and years of hard work, and the significance of this bill extends not only to Australia as a whole but also to the communities in my electorate of Adelaide. They rightfully want assistance in redeeming and understanding their rights within the super landscape. Each time I speak with a constituent, I am reminded of how important the superannuation system is and how important it is to put money aside to ensure that there are some funds there when you retire.

We all know that the superannuation system was subjected to different misappropriations by preceding administrations. We recall clearly what happened in 2015 when the then coalition government chopped some of the increases that were meant to be made to super and that the former Labor government had legislated for. I recall very clearly at the time, even though I wasn't in this place then, the Treasurer, Mr Hockey, saying that it would be better as an increase in wages to workers instead of going into their super. I think it was about 1½ per cent that we were meant to increase it by. I was working for the ASU—the Australian Services Union—at the time, and every time I was negotiating an EDA I would raise those exact words from the then Treasurer. I've got to tell you: not one person, not one employer, increased the wages—

Photo of Sharon ClaydonSharon Claydon (Newcastle, Australian Labor Party) Share this | | Hansard source

The debate is interrupted in accordance with the resolution agreed to earlier today. The debate may be resumed at a later hour, and the member for Adelaide will be granted leave for continuation when the debate is resumed.