Treasury has released exposure draft legislation for the objective of superannuation including the following proposed objective of superannuation:
The objective of superannuation is to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way
So what will the objective do?
Under the proposed legislation, unless an exception applies, every time a Bill or Regulations are proposed that relate to superannuation, then a “statement of compatibility” must be prepared and tabled in Parliament.
Exceptions to the obligation to prepare and table a statement of compatibility include if the provisions are minor or technical in nature, they deal with the allocation of a superannuation interest between spouses following relationship breakdown, they deal with certain Government superannuation arrangements, etc.
So does the Bill do anything enforceable?
In short no. The Bill specifically states that “nothing in this Act creates rights or duties that are enforceable in judicial or other proceedings”.
What about failing to prepare or table a statement of compatibility? No, that will “not affect the validity, operation or enforcement of the Act or any other provision of a law of the Commonwealth”.
Well, what about the Courts? Again no – “A statement of compatibility prepared under this Act is not binding on any court or tribunal”.
So, in the end we have an obligation to prepare and lodge a statement that is not binding on anyone, provides no rights and has no consequences for failure to comply with that obligation.
Anyone who has seen the equivalent statements for Human Rights charters will no doubt see the similarity of a statement that sits at the end of the explanatory memorandum (that is mostly unread by those who read bills and regulations).
What about the objective itself, any concerns?
Notwithstanding its lack of enforceability, the objective will, no doubt, be used as a rallying cry against the current superannuation settings or future proposed changes to superannuation.
When it was first proposed, 10 or so years ago, the objective was to be used as a “shield” to encourage Governments to stop the continuing tinkering to the superannuation system. It could be said that this proposed objective could be used as a “sword” to encourage or justify future superannuation changes.
In that light, the following words (which are discussed in the explanatory memorandum in some detail) should be noted:
“Preserve savings” is no doubt aimed at preventing early access measures such as the Covid hardship access measure and using super for purchasing a home.
“Dignified retirement” is no doubt aimed at ensuring super benefits are to be used for retirement and not for paying an inheritance. This is often bandied around as justification for introducing measures aimed at larger superannuation balances.
“Equitable” is aimed at ensuring superannuation has a fair application to all parts of Australia. There is tension with this, as superannuation is inherently inequitable. That is, a system designed to apply a low tax on savings for retirement is always going to favour the better off in society. That said, equitable could also be used as a justification for introducing measures at paring back tax concessions for superannuation and/ or measures aimed at larger superannuation balances.
“Sustainable”, as noted in the explanatory memorandum, is aimed at an “economically and fiscally sustainable” superannuation system. Again, this could be used as a justification for introducing measures at paring back tax concessions for superannuation and/ or measures aimed at larger superannuation balances. The explanatory memorandum does not state that it relates to other forms of sustainability, such as an environmental sustainability. But could sustainable be interpreted that way by future governments or interested organisations?
Can the regulators enforce the objective against super funds?
Technically no. The Bill will give no powers to regulators to enforce it against super funds – if, for example, they are acting in a manner that is contrary to the objective. This is noted, for example, in the following paragraph 1.80 of the explanatory memorandum:
1.80 The Objective Bill does not create any rights or duties that are enforceable in judicial or other proceedings. This reinforces that enshrining the objective in legislation is intended to serve as a true north for policy makers, government, regulators, industry, and the wider community, on the purpose of superannuation and its role within the broader retirement income system. It is not intended to create any rights or obligations for participants in the superannuation industry (for example, it is not to be considered in assessing the conduct or liability of a trustee of a superannuation fund).
So, while it creates no rights, it is intended to serve as a “true north” for regulators and, therefore, could influence how they enforce other regulatory and taxation laws.
Time will tell if the objective (assuming the Bill passes) will be a toothless tiger or a trojan horse.
Phil Broderick
Principal
T +61 3 9611 0163 l M +61 419 512 801
E pbroderick@sladen.com.au
Terence Wong
Senior Associate
T +61 3 9611 0112 l M +61 0458 846 022
E twong@sladen.com.au
Jan Harnischmacher
Lawyer
T +61 3 9611 0158
E jharnischmacher@sladen.com.au
