Coalition Senators' Additional Comments

Background

1.1Coalition Senators will not be opposing this legislation, as it is not urgent, non-binding and a distraction from the core cost of living issues that Australians are facing under the Albanese Labor Government’s economic mismanagement.

1.2The former Coalition Government delivered major reforms to superannuation that supported better member outcomes, better performance, and transparent governance, and that were driven by the clear understanding that superannuation is Australians’ money.

1.3The centrepiece of these reforms was the Best Financial Interest Duty (BFID). The BFID was implemented as part of the ‘Your Super, Your Future’ reform package. It requires super funds to demonstrate that their investment decisions are in the best financial interests of their members.

1.4The Albanese Government’s first act in the Treasury portfolio in 2022 was to introduce regulations repealing the Coalition’s strong disclosure requirements for super funds in their Annual Members’ Meeting Notices, which required funds to disclose to their members the quantum of payments to unions and third party organisations in that financial year.

1.5In February 2023, the Senate disallowed the Government's attempt to cover up these payments.

1.6The disclosures since then revealed that in the last Financial Year (2022-23) just 10 super funds made over $15m in payments to unions and over $21m to the now defunct Industry Super Australia. [1]

1.7The Prime Minister and the Treasurer promised no changes to superannuation prior to the election and the Prime Minister promised ‘no major changes’ to superannuation in February 2023, but have since broken that promise by introducing a new superannuation tax on unrealised capital gains, which is a world first wealth tax that will hurt farmers and family businesses and force Australians to pay tax on money they have not earned.

1.8The Government’s failure to index their new superannuation tax means up to two million young Australians earning average wages today will face a wealth tax, according to analysis of Treasury modelling published in The Australian.[2]Coalition Senators call on the Government to abandon its broken promise on taxing superannuation.

Objective of the retirement income system

1.9Coalition Senators would like to note various issues with proposed legislation.

1.10Firstly, it is curious that the Government has decided to push through a legislated objective for superannuation alone, but not a legislated objective for the retirement system as a whole.

1.11The 2020 Retirement Income review, commissioned by former Coalition Treasurer Josh Frydenberg and chaired by Mr Mike Callaghan AM PSM, suggested “an objective of the retirement income system” and an agreed “role of the pillars … in terms of how they can contribute towards achieving the system’s objective.”[3] This recommendation supersedes the recommendation made by the Financial System Inquiry in 2014.

1.12The Review’s suggested objective includes certain terms that have been adopted by the Government in the proposed Bill, but they have been repurposed specifically as an objective for superannuation alone.[4]

1.13Several witnesses who appeared before the inquiry emphasised how setting an objective for the retirement system overall was more important than just setting an objective for superannuation.

1.14Super Consumers Australia, when asked, agreed that super is just one part of the system:

Absolutely. In some of our earlier submissions and statements on this, we also called out the importance of setting an objective for the retirement system overall because, as you say, superannuation is just one part of it. It is one lever that can be used. It has its strengths, but it also has its limitations. So the purpose of the broader retirement system is an important consideration in thinking through how policymakers can improve the lives of Australians.[5]

1.15Furthermore, Super Consumers emphasised that other parts of the system play an important role in retirement outcomes, including “the age pension, private savings and owning a home.”[6]

All those other aspects are really important to people having a good retirement. That's why we have called out the importance of setting a broader objective for the system overall as well.[7]

1.16CPA Australia, when appearing before the Committee, noted that this Bill only focuses on superannuation which is only one part of the puzzle:

It doesn't really talk about anything else outside of that particular bubble, when we know that it's not only superannuation that's important to retirees; it's the aged pension and it's the broader social security landscape for folks who might have retired earlier. It's also, though, things that get routinely excluded from the scope of retirement income reviews.[8]

1.17When appearing before the Committee, the Grattan Institute argued that the Government should be setting an objective for retirement income system as a whole rather than just for superannuation:

We should be setting an objective for the retirement income system as a whole, which is what the independent Retirement income review recommended in 2020. That recommendation was an objective to deliver adequate standards of living in retirement in an equitable, sustainable and cohesive way, and then you could have a sub objective for the superannuation system that doesn't allocate it a role or a core purpose of providing a minimum adequate standard of living in retirement. That's the role of the age pension and rent assistance.[9]

1.18The Grattan Institute expressed concern that by enshrining the objective as proposed in the Bill, “we're preferencing one part of the system in the provision of retirement income, and we're also preferencing the provision of retirement income over people's priorities during their working life.”[10]

1.19In their submission and at the public hearing, the Grattan Institute maintained that the Retirement Income review “remains the best framework to really think holistically about the objectives of retirement income policy”.[11]

1.20Based off their research, the Grattan Institute explained to the Committee the role of superannuation in the broader retirement income context, noting that:

… most people will draw on a combination of some superannuation—certainly if we're saying younger people in the future, half their income in retirement will come from super or private savings but close to half will come from the age pension. They may be saving something else outside and then, unfortunately, in fewer cases be living in their own home.[12]

1.21They further clarified that only the top 20 per cent of earners are currently relying substantially on superannuation in retirement, and in the future super will only form 50 per cent of retirement income for the average person, excluding housing.[13]

1.22Even the ACTU agreed there should be an objective for the whole retirement income system.[14]

1.23Given superannuation currently only consists of one part of the retirement income framework, Coalition Senators are of the view that the Government should develop an objective that captures the entire retirement income system including all the pillars. This should take into account housing outcomes and quality of life in retirement.

Home ownership in retirement

1.24As noted in the majority report, numerous witnesses outlined the importance of home ownership to retirement outcomes.

1.25Coalition Senators note that this legislation is partly a political attempt by the Labor Government to shut down debate on policy options on allowing people to use superannuation to purchase a home. Indeed, the superannuation industry groups strongly support this legislation partly because of this reason.

1.26Super Consumers Australia told the Committee that renters in retirement, according to their research, face greater financial stress:

We've found in our research that those who are continuing to rent into retirement have significantly elevated levels of financial stress, and that is down to the way the system is designed. Things like the family home are exempt from means testing under the age pension. We find that, for example, people who are full age pensioners and own their own home don't have particularly elevated levels of financial stress, so that issue of homeownership is absolutely key to people having good retirements.[15]

1.27Their research showed that “a single person on a low income aged 65-69 who rents during retirement will need to save 110% more than homeowners, in order to maintain a similar standard of living.”[16]

1.28National Seniors Australia, in evidence given to the Committee, noted that super had supplanted home ownership in retirement, and was increasingly being used to pay rent in retirement:

… as we look at the housing situation, super is becoming more important going forward because we're seeing this increased number of older renters that don't necessarily have the capacity to anchor their later life on the basis of the family home.[17]

1.29When asked about the amount of people retiring with a mortgage and using their super to pay it down, National Seniors said that:

We would call it a significant number … we're always alarmed in terms of our research as to how many people are still retiring and having to draw down on super to pay off a mortgage; it's a significant number.[18]

1.30Furthermore, based on their contact with their members, they said that “really the pressure point out there at the moment are those folks who are retired and who are renting.”[19]

1.31At the public hearing, the Grattan Institute also stressed how those who retired owning a home did better than those who rent in retirement according to the research:

Certainly, so it's very clear that those that own their own home currently do better—as in, they have a much more financially comfortable retirement. Partly that's going to be because, mechanically, they own their own homes so not they're not having to pay rent. So, if the median rent for a rental property in Australia is about $25,000 a year, that's more than the value of the age pension. There's obviously a selection effect here as well—that is, those that are wealthier own their own homes, but I think the most disturbing statistic for us is that more than 60 per cent of single, renting retirees are in poverty, in that they have an income below less than 50 per cent of the median after housing costs. So not owning your own home in retirement is a very good predictor of financial stress and poverty.[20]

1.32It’s clear that the superannuation objective does not take housing outcomes in retirement into account, and that it seems aimed at shutting down debate on policy options to let people choose to utilise their super to support home ownership. At the public hearing, the Housing Industry Association noted that this seemed to be part of the intent of the Bill:

If I look at the explanatory memorandum that went with this, it's certainly seeking to try and stop those types of things. It seems to indicate that it is trying to restrict that from happening in the future. We would be concerned if this just shuts the door on having an open and mature conversation about a realistic option.[21]

1.33Indeed, the Association of Superannuation Funds of Australia (ASFA), which supports the Bill, told the Committee that they don’t think super for housing schemes would align with the proposed objective of super, referring to a similar scheme in Canada called the Home Buyers’ Plan:

As to whether or not the form of those words would then perhaps allow for some of the schemes that we've heard, given evidence today—we discussed the Canadian scheme earlier; it remains to be seen whether or not that would meet the objective test. ASFA would suggest it probably doesn't in its current form. Given that this objective really does enshrine the nature of preservation and the focus on retirement income provision of superannuation, then that's probably where it should sit.[22]

1.34Nevertheless, witnesses have confirmed to the Treasury that the legislation is non-binding on future governments and largely a bureaucratic box ticking exercise.

1.35Treasury has previously confirmed the legislation does not preclude superannuation for housing or emergency, highlighting that there are existing policies within super for housing that set a precedent, and the law would only require future governments to provide a statement of compatibility, telling this committee at Senate Estimates:

Senator BRAGG: Is this designed to stop super being used for first home ownership?

Ms Kelly: It's designed to provide that shared understanding... The objective is about anchoring in the purpose of super and then for future governments to have a statement of compatibility as to whether that law change that they're proposing is compatible with this purpose. It's not that I'm not answering your question. I'm trying to say this is the purpose of super. To the extent that someone was to do something with housing, they would have to assess that against the purpose of super—if a future government was to do something on that—noting that there already are some housing policies within super. The First Home Super Saver Scheme is the notable one.[23]

1.36During the same hearing Finance Minister, Senator the Hon Katy Gallagher, was asked directly and repeatedly whether the legislation would prevent super for housing. The Finance Minister did not say it was the intent of the policy to prevent the use of super for housing.

Senator BRAGG: Your view is that legislating an objective of super would not stop super to be used for first home ownership or for being used for emergency purposes, as it was during COVID.

Senator Gallagher: Sorry, I'm just looking for some information I have on the subject of the objective of super. It's not driven by that policy, but it seeks to provide an objective of super that sets that out for the long term, acknowledging that we do have different views to those you hold about using super for housing.[24]

1.37The Institute of Financial Professionals Australia (IFPA) noted that:

It's not binding. It won't bind future governments … this might become a bit of a box-ticking exercise, similar to the human rights charter, where there's a compatibility statement that's just a little bit of paper at the end of a bill or the EM that nobody reads.[25]

1.38Furthermore, IFPA argued that it wouldn’t prevent governments from passing changes to super and won’t provide any certainty:

Senator BRAGG: The reality is, if this deal were passed, it wouldn't stop tinkering—

Mr Broderick: No.

Senator BRAGG: because it's unenforceable.

Mr Broderick: It won't. As I said in my opening statement, I think it's broad enough to almost justify tinkering. It could go the opposite way; it would actually encourage tinkering, because they'll say, 'This part of the system is not sustainable or equitable, so it needs changes', or 'We're going to make this change and we're justifying it because it is on the basis of sustainability or equity.'[26]

1.39During their appearance at the public hearing the Treasury conceded this, telling the Committee that “we can’t bind future governments from this legislation.”[27]

1.40Coalition Senators will not be deterred from developing policies which could help Australians reach their dream of homeownership by letting them use their own money, and note that the Bill is a non-binding, largely political attempt by the Government and the super sector to shape the debate in this space to exclude giving Australians more options.

1.41That the Government develop a whole-of-system retirement income system objective, outlining the objective of the retirement income system and the roles of the pillars, as suggested by the 2020 Retirement Income Review. Factors impacting home ownership in retirement should be considered as part of the development of this objective.

Footnotes

[1]Matthew Benns, ‘Almost $40m in industry super fund payments given to unions to pay for marketing and ad campaigns’, The Daily Telegraph, 30 January 2024, https://www.dailytelegraph.com.au/news/nsw/almost-40m-in-industry-super-fund-payments-given-to-unions-to-pay-for-marketing-and-ad-campaigns/news-story/fdabf4c814fdf5ce104c3dbac151486f (accessed 27 March 2024).

[2]Simon Benson, ‘Millions of young Australians could be hit by Jim Chalmers’ superannuation tax’, The Australian, 5 May 2023, https://www.theaustralian.com.au/nation/millions-of-young-australians-could-be-hit-by-jim-chalmers-superannuation-tax/news-story/b7541a98fdd8255ffa11dafa31f8d777 (accessed 26 March 2024).

[3]Retirement Income Review, Final Report, 20 November 2020, p. 27.

[4]Retirement Income Review, Final Report, 20 November 2020, p. 28.

[5]Mr Xavier O’Halloran, Director, Super Consumers Australia, Committee Hansard, 1 March 2024, p. 3.

[6]Mr O’Halloran, Super Consumers Australia, Committee Hansard, 1 March 2024, pp. 3-4.

[7]Mr O’Halloran, Super Consumers Australia, Committee Hansard, 1 March 2024, p. 4.

[8]Mr Richard Webb, Superannuation Lead, CPA Australia, Committee Hansard, 1 March 2024, p. 10.

[9]Mr Brendan Coates, Economic Policy Program Director, Grattan Institute, Committee Hansard, 1March 2024, p. 13.

[10]Mr Coates, Grattan Institute, Committee Hansard, 1 March 2024, p. 15.

[11]Mr Joseph Moloney, Economic Policy Deputy Program Director, Grattan Institute, Committee Hansard, 1 March 2024, p. 16.

[12]Mr Coates, Grattan Institute, Committee Hansard, 1 March 2024, p. 16.

[13]Mr Coates, Grattan Institute, Committee Hansard, 1 March 2024, p. 16.

[14]Mr Joseph Mitchell, Assistant Secretary, Australian Council of Trade Unions, Committee Hansard, 1March 2024, p. 27.

[15]Mr O’Halloran, Super Consumers Australia, Committee Hansard, 1 March 2024, p. 4.

[16]Super Consumers Australia, Submission 6, p. 3.

[17]Mr Chris Grice, Chief Executive Officer, National Seniors Australia, Committee Hansard, 1March2024, p. 7.

[18]Mr Grice, National Seniors Australia, Committee Hansard, 1 March 2024, p. 7.

[19]Mr Grice, National Seniors Australia, Committee Hansard, 1 March 2024, p. 7.

[20]Mr Coates, Grattan Institute, Committee Hansard, 1 March 2024, p. 16.

[21]Mr Simon Croft, Chief Executive, Industry and Policy, Housing Industry Association, Committee Hansard, 1 March 2024, p. 18.

[22]Ms Mary Delahunty, Chief Executive Officer, Association of Superannuation Funds of Australia Ltd, Committee Hansard, 1 March 2024, p. 33.

[23]Ms Lynn Kelly, First Assistant Secretary, Retirement Advice and Investment Division, Senate Economics Legislation Committee Hansard, 25 October 2023, p. 97.

[24]Senator Katy Gallagher, Minister for Finance, Minister for the Public Service, Minister for Women, Senate Economics Legislation Committee Hansard, 25 October 2023, p. 98.

[25]Mr Phil Broderick, Director and Chair, Superannuation Technical and Policy Committee, Institute of Financial Professionals Australia (IFPA), Committee Hansard, 1 March 2024, p. 9.

[26]Mr Broderick, IFPA, Committee Hansard, 1 March 2024, p. 11.

[27]Mr Luke Spear, Assistant Secretary, Member Outcomes and Governance Branch, Department of the Treasury, Committee Hansard, 1 March 2024, p. 39.