Plan to protect superannuation against ‘raids’ for housing, university

Pandemic-era measures that allowed Australians to withdraw billions from their retirement savings would be banned under a federal government plan to protect superannuation by enshrining a definition in law.

Financial Services Minister Stephen Jones also said the budget impact of some super tax concessions had to be considered but a legislated objective needed to come first.

Financial Services Minister Stephen Jones says the government will enshrine a definition of superannuation.Credit: Oscar Colman

The move sets up a stoush with the Coalition after Opposition Leader Peter Dutton recently recommitted to a policy of giving first-home buyers early access to their super to help them gain a foothold in the property market.

In a speech on Tuesday, Jones said “the vicious cycle of plans to raid super” would continue unless it was protected. He highlighted proposals to use it for university debts or house deposits as well as the former government’s “disastrous decision” to allow more than 3 million people to withdraw nearly $38 billion from their funds during the COVID-19 pandemic.

“The policy ideas have too often been confused at best or damaging at worst,” he told the Australian Financial Review Super & Wealth Summit.

“But like a Mariah Carey single at Christmas, these ideas keep coming back, and they will keep coming back if there is no clear and shared objective of super.”

The assistant treasurer also acknowledged that tax concessions on super were a “lightning rod for discussion”, but said those conversations could not be had until there was an enshrined objective.

High-income earners who face income tax rates of up to 45 per cent pay only 15 per cent tax on concessional super contributions. There are 32 self-managed super funds with more than $100 million in assets and the largest has more than $400 million.

“If the objective of super is to provide a tax-preferred means for estate planning, you could say it is doing its job,” Jones said.

“I celebrate success, but the concessional taxation of funds like these has a real cost to the budget, which needs to be considered.”

Legislating a definition for super was first recommended in the 2014 Financial System Inquiry report, which said a clear statement of the industry’s objectives would allow the government to better target and stabilise policy settings.

“Clearly articulated objectives that have broad community support would help to align policy settings, industry initiatives and community expectations,” the report said.

The former Coalition government tried to legislate a definition of super in 2016, when then-financial services minister Kelly O’Dwyer introduced a bill to enshrine its goal as providing “income in retirement to substitute or supplement the age pension”. It lapsed in the Senate.

Opposition financial services spokesman Stuart Robert said the Coalition believed a broad, bipartisan objective for superannuation should be legislated.

“We’re up for a serious discussion,” he said.

However, Robert said allowing people to use their super to purchase a home would also work with an enshrined definition as it would free up more income in retirement than if people continued to rent.

“This is all about access to income in retirement. If you own your home, you have a lot more income for retirement,” Robert said.

Jones said the government would consult widely on an agreed objective for super.

“Having an objective of super will enable us to identify opportunities where the national interest and member interests align,” he said. “It will also provide the talisman to assess the vicious cycle of plans to raid super.”

In his budget reply speech, Dutton said first-home buyers should be able to take money out of their super to buy a home and return it to their fund if they later sold the property.

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