Super loophole closed but ‘dumb proposals remain’, says ALP

Labor is demanding further changes to key superannuation reforms aimed at ensuring the $3 trillion sector works more efficiently for members.

Treasurer Josh Frydenberg. Picture: Gary Ramage

Labor is demanding further changes to key superannuation reforms aimed at ensuring the $3 trillion sector works more efficiently for members after the government overhauled its new performance benchmarking regime.

The government’s Your Future, Your Super legislation seeks to ensure that super accounts are “stapled” to individuals as they change jobs, preventing the automatic creation of new accounts, while also cracking down on the underperformance of key super products.

On Wednesday, the government announced amendments to strengthen its performance test, allowing it to include administration fees for the first time. It also made changes to ensure funds were not deterred, under the test, from investing in unlisted property and infrastructure assets.

Treasurer Josh Frydenberg and Superannuation Minister Jane Hume released new regulations for consultation which included a “strengthened methodology” for the annual performance test. They also included a prescribed definition for a “stapled fund”, including new “tie-breaker” rules to determine which fund will become an employee’s stapled fund in instances where the worker already has multiple existing funds.

The government has promoted its super reforms, saying they are estimated to save Australian workers $17.9bn over 10 years by reducing waste and injecting greater accountability into the system.

“This package builds on the government’s legislated superannuation reforms which have included consolidating 3.3 million unintended multiple accounts worth $4.3bn, capping fees on low balance accounts, banning exit fees and ensuring younger Australians do not pay unnecessary insurance premiums,” Mr Frydenberg and Senator Hume said.

Consultation on the exposure draft regulations will be open for four weeks and close on May 25.

Opposition superannuation spokesman Stephen Jones welcome the government’s changes, saying they closed an “absurd loophole” which would have encouraged bad funds to hike administration fees, while also removing a disincentive for funds to invest in Australian infrastructure.

However, he warned that “two really dumb proposals remain on the table” including a provision which he said would hand Mr Frydenberg the power to cancel super fund investments that he did not agree with.

“Subjugating rational investment decisions to the Treasurer’s political whims represents a sovereign risk and sets a dangerous precedent for the business community,” Mr Jones said.

“That creates a scenario where superannuation investments become a political bargaining chip in future hung parliaments.

“It’s not hard to imagine independents and minor parties using it to extract concessions from future governments of all stripes.”

Mr Jones also said he was concerned the package could still result in people being trapped in underperforming funds through the legislation’s provisions which staple a single fund to a worker.

“For seven months, Labor’s warned the government its super reforms would leave workers worse off in retirement and damage confidence in the economy,” he said. “It’s time they listened and got it right.”