AustralianSuper chair Don Russell backs Albanese government’s ‘tidy up’ of super

The Albanese government’s super tax change was a ‘good thing to do’, according to AustralianSuper chair Don Russell, who says the system needs a ‘tidy up’.

The chairman of the nation’s largest industry superannuation fund, AustralianSuper, said the Albanese government’s proposal to raise the tax rate to 30 per cent on super balances greater than $3m was a “good thing to do”.

Don Russell, who chairs $274bn AustralianSuper and one-time chief of staff to former Prime Minister Paul Keating, told a governance conference that it was a “good thing to do” and that it would help “tidy up” the super sector to make it meet its purpose of a long-term savings vehicle. Rather than a place for some individuals to park their wealth in just before they hit retirement to gain tax advantages.

“It is a good thing to do,” Mr Russell said when asked at the Australian Institute of Company Directors governance conference about the Albanese government’s announcement about doubling the tax rate on higher super balances.

Following the conference, Mr Russell told The Australian the tax change will help support the super system.

“The tax preference needs to be there to keep the system supported, and then I think we need to think about what does the nation get from the tax preference – and that is the correct way of thinking about it.”

Mr Russell said the change to the tax rate on super balances above $3m would bring back super to what it was set up to do in the first place, to grow and invest long term savings rather than a place to park money near the end of someone’s retirement to gain access to attractive tax treatment.

He said Treasurer Jim Chalmers’ announcement on Tuesday for the change to tax on balances above $3m would help “tidy up” the super system and respond to the issue of some people who had built up their wealth outside of super but then placed it into the system near their retirement to gain tax advantages.

“That I would see as not core business for super … it was an unanticipated consequence which had really unfortunate consequences and taking advantage of huge and generous (offers),” Mr Russell said

“Later in life it is an ideal place (super) to manage your wealth if you have built it somewhere else, now what the tax treatment was all about was a way of compensating people for having their money locked up for 30 years.

“These people haven’t had their money locked up at all.”

Mr Russell, who is also a former global investment strategist at BNY Mellon Asset Management Australia, said that many of these people who had “minimal contributions to super” and had kept their wealth out of the super system.

“And they would all envisage that once they got to 60, or whatever, if they could, they would bring as much of it as they could back into the super system to manage it.

“This is really going to tidy up super.”

The government’s super tax change is unlikely to affect AustralianSuper’s 3 million members. Mr Russell didn’t know how many had more than $3m in their AustralianSuper accounts, but doubts there would be many.

He said he believed the vast majority of people with superannuation balances more than $3m would be in the self-managed superannuation system and these people would likely seek financial advice to find other investment vehicles to earn a return once the tax changes are made after the next federal election.

The federal government has also announced as part of its decision to increase the tax on super balances above $3m it would also look at defined pension schemes popular in the public service and available to politicians to which many – such as the prime minister – receive a generous pension in the hundreds of thousands of dollars.

Mr Russell said making changes to defined benefit schemes to bring them in line with the new rules of a 30 per cent tax on super balances above $3m could be “very complicated” as defined benefit arrangements are very different to a traditional superannuation fund.

“In a defined benefit scheme it is the sponsor (employer) who is committed to an income stream.

“Unless you are going to rip up the contracts around the defined benefit, all you are doing is penalising the sponsor who has been earning a return to pay for the defined benefit.”