With one announcement Prime Minster Anthony Albanese and Treasurer Jim Chalmers have not only reignited the ‘super wars’ they have also signalled their willingness to compromise the integrity of the superannuation system for political gain. Their proposal to tax funds over a $3m cap at a 30% tax rate is a blatant tax grab and moves the goal posts on those who have invested in good faith. The government is now specifically targeting people with legacy funds that have been operating within the rules for decades. It highlights a very real and much bigger problem brewing within the superannuation system and the underlying control of these funds.
Most will understand the Labor Government’s links to the trade unions at a grass roots level and their influence behind the scenes within the political regime. Over the years it’s fair to say that both political parties have seen their traditional power base change somewhat. But while the Liberal Party’s struggles to redefine itself are well known; most Australians are probably not aware of the power shift within the political landscape as it pertains to the Australian Labor Party today. Regardless of your political leaning, most would agree that a balance in power is healthy for a strong democracy. So, it’s important that people understand how the new powerbrokers are influencing the change in the political system.
Industry superannuation funds have grown to become the dominant force in the superannuation industry. Their marketing has been excellent, and workers have been drawn to them. Low-fee funds run on behalf of members of particular industries. They sound great in theory but as with anything, when power is too concentrated, it’s potentially a problem. Today, in my opinion, the industry super funds have quietly become more powerful and influential than the trade union movement ever was. The big difference between the unions and industry funds is that the amount of capital controlled by these funds is now approaching $1 trillion dollars.
The industry funds history stems from being the default superannuation fund for various industry sectors such as Hostplus for hospitality workers, REST for retail workers and UniSuper for higher education workers. To this day, there remains requirements for “Equal Representation” governance which broadly means that the superannuation fund trustees must include an equal number of directors nominated by employers or representatives of employers, and members of the fund or representatives of members including trade unions.
The more I hear the current government talk about superannuation, the more it appears to me that a level of political ideology is increasingly becoming entrenched in the superannuation system. Superannuation was always for the purpose of investing for retirement. In fact, this aspect was considered so important that there was a piece of legislation that became a cornerstone of governing superannuation funds. The Superannuation Industry (Supervision) Act subsection 62 includes a test called the sole purpose test. It literally defined that superannuation was required to meet this definition, being that superannuation funds are for the sole purpose of providing for retirement and death benefits.
Fast forward a couple of decades and I see Industry Super Fund ads in the media not talking about superannuation investment but rather about the infrastructure projects and jobs being created for everyday Australians. Well, that is very noble, but it has nothing to do with the purpose of superannuation. The obligation on the trustees of all superannuation funds is on managing the money and generating returns for superannuants for their retirement. If there are better returns elsewhere jobs have no place in the discussion and should not even be a consideration.
Now the Labor Government is pushing for changes to redefine ‘the objective of super’. Why? There may be a few reasons. Various proposals push for superannuation to access impact investing in lower-cost social housing, infrastructure, clean energy, and aged care. Many of these are government and political objectives not based on the best investment decision. There should be no crossover, it’s a dangerous and slippery slope. While there are robust governance and rigour in place around these massive pools of money being used to fund projects and create jobs, it’s critical to ensure that there is never any room for the lines to be blurred and for problems to evolve in the future. Superannuation should never be a political weapon. It’s not the government’s money, it’s the retirement savings of hard-working Australians.
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