On 14 February 2017, the Economics Legislation Committee released its report on the Superannuation (Objective) Bill 2016.
The Bill forms part of the Government’s super reforms announced in the 2016 – 17 Budget on 3 May 2016 and aims to enshrine the objective of the superannuation system. In his second reading speech, the Treasurer, The Hon. Scott Morrison MP, stated that the reforms would implement ‘the government’s election commitment to improve the fairness, sustainability, flexibility and integrity of [the] superannuation system.’
Adopting the recommendations of the 2014 Financial System Inquiry report, the Bill defines the primary objective of the system as being the provision of income in retirement to substitute or supplement the Age Pension.
Additional subsidiary objectives will be prescribed by regulation. The subsidiary objectives of the superannuation system identified by the Government are to:
- facilitate consumption smoothing over the course of an individual’s life
- ‘manage risks in retirement’ – by which we assume the Government means mandating appropriate risk management of assets during the retirement phase
- facilitate investment of assets in the best interests of fund members
- alleviate fiscal pressures on Government from the retirement income system
- be simple and efficient, and provide appropriate safeguards.
The Bill also requires that a statement of compatibility with the objectives of the system be prepared for any bill or regulation that relates to superannuation.
It is expected that by clearly defining the objective of the system, there will be more consistency in policy-making by future governments.
The view of the Economics Legislation Committee
Whilst there is universal support from stakeholders for defining comprehensive coherent objectives of the superannuation system, there are disparate views on how the primary and subsidiary objectives should be worded and the subsequent policy implications.
After considering the lack of consensus between key stakeholders, the committee reached the view that the primary objective as currently drafted, whilst not universally supported, will enhance the stability of the system and create a clear and comprehensive framework for policy-making.
The committee also emphasised the importance of independent monitoring and review and recommended future superannuation reforms are assessed and reported on as part of the Intergenerational Report which is prepared at least every five years.
The Committee recommended that the Senate should pass the Bill.
The dissenting Labor view
Although the Labor Senators agree with the motivation behind the proposed Bill, they were critical of what they see as a lack of consultation on the Government’s part.
Unlike the majority members of the Committee, the Labor Senators were of the opinion that stakeholders are capable of reaching agreement and recommended that the Government withdraw the Bill and undertake further stakeholder consultation before settling on a single primary objective. They also recommended that the Government seek broad political agreement and expressed a willingness to engage with the Government on this matter.
The Bill is currently before the Senate. The Economics Legislation Committee comprised representatives of the Liberal Party, Australian Labor Party, Nick Xenophon Team and Australian Conservatives. We are unsure of the views of other cross-benchers, however these four parties represent 54 of the 76 Senate seats. The Opposition hold 26 of these seats meaning that if they were to oppose the Bill, the Government would be reliant on the support of cross-benchers to pass the legislation in the Senate.