Parliament Updates

Zali Steggall MP speaks on Superannuation Objective Bill

18 March 2024

 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.