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The IFPA believes the existing sole purpose test better captures the core purpose of superannuation.
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Legislating super objective ‘pointless and open to abuse’
29 March 2023
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7 minute read
The Institute of Financial Professionals Australia (IFPA) has taken a stand against legislating the objective of superannuation and believes it lacks any purpose.
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Board member and chair of the superannuation technical and policy committee Phil Broderick said the fact it would fail to bind policymakers or governments made it pointless.
“What is the point of a measure that future governments could ignore or fails to require any formal consideration from future governments, such as a compulsory statement of compatibility around how any new superannuation legislation aligns with the new objective,” said Mr Broderick.
“But even if such a statement was required, it could end up being a tick-the-box exercise that would not prevent future changes.”
He said the proposed objective had several terms which could easily be misrepresented or interpreted differently to suit a current or future government.
“For example, a dignified retirement means different things to different people depending on the lifestyle to which they are accustomed,” said Mr Broderick. “Further, whether the superannuation system is sustainable may be subject to the broader budgetary and fiscal position of the Commonwealth at any given time.”
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“We fear the objective might be used as a sword by policy-makers so that once you’ve reached the level that the government thinks is enough superannuation for a dignified retirement, then anything above that is fair game.”
“This can be seen by the government’s newly proposed tax on superannuation balances above $3 million.”
Head of superannuation and financial services Natasha Panagis said the objective and purpose of superannuation already existed in the form of the sole purpose test.
“In our view, the core objective of superannuation is better captured by the sole purpose test which simply requires that superannuation funds are maintained for the purpose of providing retirement benefits to its members or to their dependents if a member dies before retirement,” said Ms Panagis.
“As the sole purpose test already exists, it could be revisited to tighten up existing preservation rules if access to superannuation is currently thought to be too easy. This will ensure we have a more targeted measure that stops access to early access schemes.”
“It is also our view that formulating an objective in isolation without factoring in the three key pillars of the retirement income system is flawed. Any legislated superannuation objective aimed at influencing policymakers moving forward must be considered in the context of the overall income system encompassing the other pillars – it should not be formulated in isolation.”
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