It’s official: Australians have had their say and we now have a Labor government in power for the next three years. So what will this likely mean for superannuation?
Well as I’ve reported several times this year, the ALP did say on more than one occasion its aim will be to make superannuation savings play a bigger role in the economic management of this country. One obvious arena we might see this happening is in the development of infrastructure.
That in itself is not a bad idea, but we probably won’t know what this means until we find out how it will be implemented and executed.
Hopefully it will be introduced using incentives to channel retirement savings toward parts of the economy the government has recognised require some heavy lifting. The one thing we do not want to see is any sort of prescriptive element included in the policy dictating exactly how superannuation portfolios have to be constructed with regard to a specific asset class.
It goes without saying SMSFs would certainly not want this prescriptive approach as it is a principle that is diametrically opposed to the philosophy behind running your own super fund.
Believe it or not, this approach has actually been tried in the past and did not work then, so revisiting it may again prove suboptimal.
However, incentivising people to invest their retirement savings in a particular type of asset or assets may not be all that easy either. If we think about the levers that may be used in this regard, tax incentives are probably the most obvious. But as the partner of a mid-tier accounting firm pointed out to me recently, this may not be workable.
Why? Because superannuation is already the most tax-effective investment vehicle in the country. As such, how many more tax concessions can the government implement to encourage the sector to operate in a particular fashion?
One thing we don’t want to see is the implementation of this policy without regard to the most important tenet of super, that is, the money belongs to the superannuants and not the government or the trustees of public offer funds.
We saw this sentiment rear its ugly head during the height of the coronavirus pandemic when lockdowns were all the rage. Back then the Morrison government implemented a financial hardship relief measure allowing individuals to withdraw up to $20,000 of their retirement savings.
The reaction to this, mainly from the then opposition and the industry funds, was outrage because it would compromise the integrity of the retirement savings system and penalise people who took advantage of the initiative in later years.
The backlash seemed to indicate the last people who should have any say over how superannuation monies can be used are the individuals who actually own the money.
It has since been established this money was not used in a totally irresponsible manner, with some of it actually already being contributed back into the super system.
There is no doubt it is a most tempting proposition to make use of the $3.5 trillion in retirement savings that is deemed to be just lying there, particularly when we are on the cusp of some difficult economic times. But to whom it belongs should never be ignored and it should always be recognised this is not just a pool of money to be used as a convenient fiscal instrument.
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