I spent a lot of time writing about the proposed new impost on total super balances above $3 million, also known as the Division 296 tax, during 2023 and 2024. Much of this coverage was spent highlighting the inequitable and egregious nature of the measure and how poor a piece of legislation this really was. And the start of 2025 has probably contextualised just how out of whack the government’s retirement savings system priorities are.
A report in The Sydney Morning Herald has brought to light legal action the Australian Prudential Regulation Authority (APRA) is taking against public offer fund First Super board member and co-chair Michael O’Connor, who is also the divisional secretary of the Construction, Forestry & Maritime Employees Union (CFMEU) manufacturing division. In its action, the prudential regulator alleges that around 2019, O’Connor made arrangements to extent the fund’s contract with the CFMEU without going to tender and ensured the union would receive an increased fee from First Super in future years.
Without going into the minute details of the case, APRA’s basic allegation is O’Connor breached his duties as a First Super director by not acting in the best financial interests of the fund’s members.
The regulator’s action has once again put the make-up of industry super fund boards under the spotlight. Many people who make up these boards are selected on the basis of groups they represent, be it employer or employee, as opposed to any real business or investment acumen they might possess. But regardless of business acumen, surely everyone can spot the conflict of interest present in this case.
The financial implications of the alleged misconduct are not insignificant for the 70,000-member industry fund, including a one-off fee of $350,000.
These allegations are extremely serious and fly in the face of the message industry super funds only use the money for which they are responsible to benefit members. But I’ll be very surprised if you read, see or hear much coverage about it and certainly not from Canberra.
To bring the situation back to a policy context, one should consider which issue is more serious – 32 SMSFs with balances of over $100 million continuing to receive superannuation tax concessions or a corporate governance matter that could see the retirement savings of many members being used for ulterior motives.
Taking a neutral stance, you could argue addressing both situations is equally important for the integrity of the system, but it must be acknowledged First Super is not the only industry fund having a board comprised in such a way.
Further, great attention is given to individuals looking to set up an SMSF as to whether they are prepared to take on the responsibility of being a trustee of the fund and rightly so. But why isn’t there an equal degree of vigilance when it comes to the people charged with running large industry funds? After all, their decisions have the prospect of significantly impacting a huge number of Australians.
In June 2024, the total pool of superannuation savings approached $4 trillion and it will only continue to grow. Surely it’s time now for policymakers to shift their focus to a glaring governance issue that has been around pretty much since the inception of the compulsory super regime rather than continually target a small subset of the industry it perceives to be too successful.
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