Super by name and nature apparently

purpose of superannuation

Government plans to lock down the purpose of superannuation is being undermined by its introduction of policies diverting retirement savings to other purposes.

The Albanese government began its term in government declaring it was taking up the bold ambition of enshrining the purpose of superannuation – something that was recommended as part of David Murray’s Financial System Inquiry back in 2014.

Further, this was supposed to be the first stop on its superannuation journey whereby no new policies would be formulated or put in motion from here on in.

However, since declaring this intention, the powers that be in Canberra seem to have spared no effort in completely undermining this strategy.

It began almost immediately after the commitment to put the purpose of super into law when Assistant Treasurer and Financial Services Minister Stephen Jones announced the government would be imposing an additional 15 per cent tax on individuals with superannuation balances over $3 million.

This policy decision was so urgent it obviously couldn’t wait for the drawn-out process of properly defining the role of super.

Next we heard the Minister confirm he’d like to see the retirement savings of Australians potentially be used for greater community schemes, such as assisting in the provision of more affordable housing.

Then the government shared its desire to have superannuation money help fund badly needed infrastructure projects across the country.

And use of the irresistible retirement savings well didn’t end at the border of the largest island in the world, with Jones suggesting it could even potentially be used to fund international aid to Indonesia.

But just when you thought all of the uses for superannuation had been exhausted, along came another one last weekend. It seems the government now wants people’s retirement savings to be used to fund shortfalls in aged care too.

A new issues paper submitted to the government has put forward the idea that private savings be used to improve the quality of aged care. And what will the private savings source be? You guessed it – superannuation.

How will it work? The proposal is for a portion of an individual’s superannuation balance to be ‘ring-fenced’ in order for it to be used to help lift the standards of aged care throughout the country. Interestingly, one of the flaws of this measure has already been identified. The ring fence will be applied uniformly so every Australian will be forced to play their part in the funding channel, even if it turns out they don’t need to use any aged-care facilities in their lifetime.

It comes back to a recurring theme of the Albanese government and that is Canberra views the pool of money held in superannuation as its money and not our money. And if this is the message, how incentivised will people be in contributing more of their hard-earned cash to the system?

Further, the mixed messaging is dumbfounding. On the one hand the ALP wants to impose higher tax rates on total super balances over $3 million because the concessional rate for these people is too generous. But then one of the suggestions in this issues paper is for individuals who draw down their super to pay for aged care to be incentivised to do so via favourable tax treatment. So do away with one level of tax concessions, but then look to introduce another. Talk about confusing.

The attitude of the government shows the system is aptly referred to as super, but not because it’s short for superannuation. It’s super all right – the most super fiscal and social project funding lever and pool in the history of mankind.


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