Federal budget: implications for superannuation
Friday 09 Oct 2020
The Federal Government has signalled its legislative priorities for superannuation over the next four years.
The government has not announced any further extension to the early access to superannuation scheme as threatened, nor has it guaranteed workers their legislated increase to the Superannuation Guarantee.
Instead, it is once again prioritising measures which would benefit for profit super funds and damage the better performing and better-governed industry super funds.
The government has allocated $159.6 million over four years to implement these measures, beginning in 2020-21.
The government will focus on:
- Default – it has partially accepted the recommendations of the Productivity Commission’s inquiry into an alternative default system and will implement ‘stapling’ of members to their current or first superannuation fund. Members will not default into their workplace nominated default if they already have a superannuation fund.
- Choosing a fund – The Australian Taxation Office will create an online platform that offers comparisons between MySuper products to encourage members to switch and select their stapled default fund. ‘Dashboards’ have been an objective of the Government for years, and this seems to be a final push to achieve it.
- Performance – a minimum performance threshold will apply to MySuper products in the first instance, and to some Choice products from 1 July 2022, despite the Banking Royal Commission finding unconscionably poor performance in for-profit Choice products.
The government has signalled this will be a net investment performance threshold rather than overall performance, which may be a concession to high-fee for-profit funds. Underperforming funds have no place in the superannuation system, but for-profit Choice funds are the worst performing and were the subject of the most intense scrutiny by the Banking Royal Commission.
The government promises to eventually apply performance tests to the Choice sector are so far just words. Despite being required to, APRA still have not produced heat maps for Choice products.
- Sole Purpose – a more stringent Sole Purpose Test has been proposed, which will ‘ensure trustees only act in the best financial interests of members.’
The government has twin objectives in this space: to limit the ability for industry super funds to advertise and to enter into commercial agreements with trade unions, and to tackle what they perceive as an emergent threat of the growing power of industry super funds as active investors.
It is unclear how the government will implement a more stringent definition of the Sole Purpose test or what the focus of their implementation might be. The Government will be sure, however, to ensure any refinements of the sole purpose test allow dividend payments to for-profit funds’ shareholders – despite profit in the system being clearly opposed to members’ interests.
The government has not issued details around these announcements however it appears it is still mired in a culture war against industry super funds and unions at the expense of pursuing real reform to ensure workers are:
- paid super on time and in full;
- women retire with equal superannuation to men; and
- every worker is paid super on every dollar earned.