AustralianSuper seeks changes to tax system to make Australia more competitive against world markets

The CEO of the nation’s largest super fund has defended sending billions of dollars of members’ money offshore, saying US companies offer better returns as he urged tax reform to make Australia more competitive.

Ross Greenwood, Business Editor at Sky News Australia, left, and Paul Schroder, AustralianSuper chief executive, at Australia's Economic Outlook 2025. Picture: Max Mason-Hubers / The Australian

AustralianSuper chief executive Paul Schroder said his enormous bet on Wall Street was not a rebuke to Australia, but the billions of member dollars sent offshore each year earned him better returns than at home.

“Australia’s got some advantages (such as) franking credits … but it’s very important that we build a completely diversified portfolio of listed and unlisted assets in a range of geographies,” Mr Schroder said in conversation with Sky News Business Editor Ross Greenwood at Australia’s Economic Outlook.

“To be really direct about it, other than Treasuries, we do not invest in countries. We invest in companies, and some of the greatest companies are in the US. We’ve got some great companies in Australia. Should we have more? Yes.”

For every dollar flowing into AustralianSuper, the nation’s largest super fund with $365bn in assets, about 70c is invested overseas. The fund has previously warned that it is nearing its practical capacity for Australian asset ownership.

AusSuper has $90bn invested in Australia and participated in $6bn of capital raisings “in the last little while” as well as some IPOs, Mr Schroder said.

Paul Schroder, CEO of AustralianSuper, said his fund invests in companies not countries. Picture: Max Mason-Hubers / The Australian

He suggested there might be an opportunity to use the capital in Australia’s $4.2trn super system to create companies, but they would have to be competitive.

This is where the federal government could help, he suggested.

“If you run a national business in Australia at the moment, you have about 100 different taxes you have to pay. How stupid is that? So why don’t we fix that?

“If we look at the take-up of technology, most big companies are pretty good at that. But small and medium-sized companies struggle with it big time. How could we help small and medium-sized enterprises, which employ so many people, to make the most of technology and become much more productive?”

The tax system should be reformed to favour productive allocation of capital and investing “in things that make money”, Mr Schroder said.

Appearing at the same event, Prime Minister Anthony Albanese laid out his economic agenda and said he had taken the policy of taxing unrealised capital gains to the election, which he won resoundingly.

However, Mr Albanese refused to answer whether he would consider changing Labor’s controversial plan to tax super balances higher than $3m.

“We went to an election on it, and we have, as I said, half a per cent of the population are impacted by it,” the PM said.

Mr Schroder dismissed suggestions that industry super funds were behind the government’s tax plan as a means of driving people away from SMSFs.

“This is a sector of choice and competition. I definitely want sector neutrality. We would never do anything, absolutely never do anything, to try and make it harder for somebody else who’s trying to make good super.”

Mr Schroder also said the prime minister’s push for more diverse sources of growth was a great ambition but that AustralianSuper would still put its money overseas.

“We can’t wait until the tech sector grows in Australia. We’ve got to have exposure to that. We’ve got to encourage small and medium-sized enterprises, we have to have sleeves of venture capital. We also have to make money every single day. So, where’s that tech? It’s in the US,” he said.

Reflecting on the tensions between public and private markets and the declining number of companies listing on the ASX, the AusSuper boss believed there was a place for both in a robust financial system.

“Sometimes you buy public assets and make them private, and sometimes you take private assets and make them public, as we’ve seen recently.”

The fund’s own private markets push has worked against it in recent years. The super giant posted a return of 9.5 per cent for the 12 months to the end of June, below the estimated sector median of 10.2 per cent and behind its megafund peers. It is the second year in a row that AustralianSuper has underperformed.

Its chief investment officer Mark Delaney this week told The Australian the fund was looking to put more money into private equity.

Mr Schroder said super was great for funding businesses but it had its own issues too.

“Complacency or hubris or a failure to continuously listen carefully, they’re all disasters. Every successful organisation, every successful society, has destroyed itself over that,” he said, in a nod to AusSuper’s push for companies to improve on culture.

“Super is super, but it’s not universally super. It’s not perfect … What we find with the businesses that we’re dealing with is we’re interested in creating long-term value. All the companies we’re invested in like us being on their register, because we’re interested in the very long term.”

Originally published as AustralianSuper seeks changes to tax system to make Australia more competitive against world markets