The government says the goal is to provide a shared understanding of superannuation and ensure it focuses on saving for retirement.
Government releases draft legislation for objective of super
Treasury has released two draft bills for consultation which will enshrine an objective for superannuation into legislation.
The Superannuation (Objective) Bill 2023 outlines that 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 objective outlined in the draft bill is the same objective proposed by the government in its consultation in February. The EM provides a more detailed explanation of the wording rationale behind the objective.
The explanatory materials outlined that the objective will provide a “shared understanding of superannuation and ensure that the focus of superannuation is on preserving savings to deliver income for a dignified retirement”
“The intent of the Objective Bill is to require policy-makers to demonstrate to the Parliament, and Australians, how any future changes to superannuation law are consistent with the legislated objective,” the EM said.
“The objective is not intended to change the operation or interpretation of existing superannuation law, prudential standards or governing rules of superannuation entities. For example, it will not change or prevent how members can currently access their superannuation such as the payment of a lump sum on retirement or early access to their superannuation in exceptional circumstances.”
The draft legislation for the objective of super is expected to be introduced into Parliament in the coming months.
The release of the draft bill follows a consultation undertaken earlier this year in which the industry provided extensive feedback.
The SMSF Association stressed the importance of the objective of superannuation providing appropriate and necessary guard rails for government policy.
“It should not operate as a mechanism to allow continued changes or act as a means to justify any Government’s short-term policies without proper consideration of the medium and long-term effects and consequences,” the association said previously in a submission.
The SMSF Association also highlighted that the objective only focuses on a single element of the retirement income system
“An objective that considers superannuation in isolation of the other retirement pillars risks distorted outcomes and negative impacts over the medium and long term,” the submission said.
“All future superannuation policies and their impacts must be assessed with proper consideration, and clear analysis of the outcomes and effects within the broader retirement income remit. It must extend beyond a single element such as taxation.”
Shadow Minister for Finance Jane Hume recently raised similar concerns that the proposed objective focuses only on one pillar of retirement and ignores the importance of the aged pension and home ownership.
In a statement made available to sister brand SMSF Adviser, Ms Hume stressed that the Australian retirement income system is a “three-pillar” system, one that encompasses a means-tested age pension, compulsory superannuation savings, and voluntary private savings both inside and outside the super system.
The recently published Intergenerational Report, she said, highlights the importance of home ownership on retirement outcomes for Australians.
“Those that own their own home, generally have lower housing costs in their retirement compared to renters, as well as a store of wealth that can be drawn down on retirement,” she said.