working for Australians in retirement

Superannuation Reform Package

Public Consultation on the exposure draft legislation:

Superannuation (Objective) Bill 2016
Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016
Treasury Laws Amendment (Fair and Sustainable Superannuation) Regulation 2016
[Issued on 8 September 2016]

1. the objective of superannuation;
2. tax deductions for personal superannuation contributions;
3. improve superannuation balances of low income spouses;
4. introduce a Low Income Superannuation Tax Offset (LISTO); and
5. harmonising contribution rules for those aged 65-74.

We support and agree with the details contained in measures 2, 3, 4 and 5 of the draft legislation but we do not agree with the detail on the first measure - the objective of superannuation - contained in the draft legislation document and consider that this is not an adequate objective.

A.I.R. accepts the value of a broad political and community agreement to enshrine in legislation a realistic objective of superannuation and a set of measurable goals to ensure that clarity of purpose and a clear path forward. However, it is essential that the agreed objective reflects the needs of those who now and in the future will self-fund their retirement, and the need for improved and increased self-sufficiency in retirement.

As such, A.I.R. strongly believes that the primary objective of the superannuation system is to enable Australians to be self-reliant and have a sustainable income stream in retirement that will adequately support a comfortable and active retirement lifestyle.

The Government’s current proposed objective - to provide income in retirement to substitute or supplement the age pension - is not a positive statement and is not based on the perspective of those currently living on or planning their retirement future funded by their superannuation.

On the question of intent Productivity Commissioner Angela MacRae recently stated that the aim of the superannuation system is to be able to meet its primary purpose of providing a sustainable, adequate and equitable retirement income stream which must be optimised over the lifetime of a person in retirement.

Back in 2013 the Charter Group of the Council of Superannuation Custodians set up by the Government concluded that the objectives of the Australian superannuation system are to:

  • provide an adequate level of retirement income;
  • relieve pressure on the Age Pension; and
  • increase national savings, creating a pool of patient capital to be invested as decided by fiduciary trustees.

A recent media article clearly articulated that the problem with the objective of the
superannuation in the draft legislation is that it puts superannuation and the Age Pension the wrong way around.

There are now some 1.6 million Australians who are trying to create their own self sufficiency by looking after themselves in retirement by either partly or fully self-funding their retirement. The majority of this group would not support the view that superannuation is just “to provide income in retirement to substitute or supplement the Age Pension”.

Also in 2013 the then Minister for Financial Services and Superannuation, Bill Shorten MP, stated

"We owe it to all Australians, present and future, to sustain a system that gives
everybody a fair shot at a decent and dignified retirement. This is the ongoing
objective of superannuation."

Secondary Objectives
It is noted that in the Exposure Draft explanatory materials for the Superannuation Objective Bill, as well as having a Primary Objective for superannuation, the Government has proposed five Subsidiary Objectives which provide the framework for assessing the compatibility of any Bill or Regulations associated with the primary objective of the superannuation.

However, these Subsidiary Objectives do not seem to be in the actual legislation for the primary objective. A.I.R. suggests these should be included in the legislation if it is intended that they are to be used to evaluate other superannuation legislation or regulations.

Withdrawal of the contribution harmonisation
These issues around the objective of superannuation are compounded by the decision announced on 15 September to withdraw the measures proposed under item 5 of this draft legislation to harmonise the contribution rules for people aged 65 to 74. We consider that this decision completely ignores changes currently happening in the community and our association strongly objects to this decision.

A.I.R. reiterates it’s clearly stated position that there must be bi-partisan agreement to a holistic review of Australia’s retirement income and superannuation system.

 SEE FULL DOCUMENT HERE