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Busy agenda ahead for super

Emma Rapaport  |  28 May 2019Text size  Decrease  Increase  |  
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Superannuation funds are preparing for another wave of policy changes with a new-look Senate and a fresh face in the superannuation and financial services portfolio.

Following the Coalition’s thumping election win and subsequent reshuffle, Liberal party senator Jane Hume has been tapped to head the superannuation, financial Services and financial technology portfolio. Hume replaces Stuart Robert who was named Minister for the National Disability Insurance Scheme.

Before entering politics, Hume was a senior policy adviser for industry super fund AustralianSuper. She has also worked in private banking at National Australia Bank, and in senior roles at Rothschild Asset Management and Deutsche Bank.

The financial services industry welcomed Hume and newly appointed Michael Sukkar as Assistant Treasurer to their roles, noting among other reforms the pledge to increase compulsory superannuation contributions from 9.5 to 12 per cent.

"The team is well-versed and in a strong position to deliver effective policy with robust economic outcomes for superannuation and financial services," Association of Superannuation Funds of Australia said.

"This is especially important at a time when the government is moving to implement significant reform to superannuation including: the bi-partisan commitment to increase superannuation to 12 per cent; the Protecting Your Super package; the recommendations of the royal commission and other pre-election commitments."

Labor loss kills off policy plans

Labor's loss means several contentious policies are no longer on the table, says Peter Burgess, SuperConcepts General Manager Technical Services. These policies include the proposal to remove refundable franking credits, which would have affected pension phase self-managed super funds, the controversial 10 per cent rule for super contribution caps and other superannuation concessions.

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On the table are the measures announced in this year’s pre-election federal budget to encourage older Australia’s to contribute to super, as well as the super measures announced in previous federal budgets, which had not been passed by the parliament at the time the election was called.

With the Morrison government securing an outright majority in the lower house and a less hostile Senate, Burgess says the government may renew attempts to increase the maximum number of SMSF members from 4 to 6.

Member expansion was first flagged by then Coalition financial services minister Kelly O'Dwyer in April last year and confirmed in the budget a month later. The subsequent bill received backing from the SMSF Association in March this year when it was suggested it would help retirees manage Labor's plan to axe cash refunds for franking credits.

HLB Mann Judd director and head of SMSF Andrew Yee told Morningstarthe proposal would largely benefit families who want to use their SMSF to buy a large investment such as property. However, he warned six-member SMSF accounts could be an administrative nightmare for accountants and planners.

"Building an investment portfolio that suits every member at different stages of life would be a challenge, let alone reaching a consensus on decision-making, and signing off on the annual account," Yee says.

Fund seek certainty on aims of super laws

Looking ahead to the next three years, it's clear the incoming-Assistant Minister's plate is full. The government will need to consider how to implement recommendations flowing from both the Hayne royal commission and the Productivity Commission.

Funds are also still seeking leadership around the objective of super legislation - a bill which has been before parliament since 2016, and the requirement for funds to offer comprehensive income products for retirement, delayed until 2022.

Stephen Huppert, head of engagement for Optimum Pensions, says it's difficult to know exactly what the incoming government will focus on with so much on the table. But he's confident the industry's continued push to increase the superannuation guarantee (SG) from 9.5 per cent to 12 per cent won't get up.

"In the days following the election, Treasurer Josh Frydenberg superannuation announced he will commission a review of the retirement income system - recommended by the Productivity Commission. This has been viewed by some in the industry as an attempt to delay current legislative increases to the SG," he says.

Huppert suggested the Coalition could be responding to concerns within the small business community who say SG increases would come at a cost to the industry. Grattan Institute analysis also shows increasing the SG to 12 per cent will "strip up to an extra $20 billion from workers’ wages each year" and exacerbate sluggish wage growth.

Jonathan Steffanoni, principal consultant of legal and risk at QMV, says while the objective of the superannuation bill – which looked to establish the primary objective of the superannuation system - has fallen off the table in the last 12 months, and that commentary from Treasury suggests it's coming back into focus.

Steffanoni also expects the independent directors bill – which mandated one-third of independent directors for all super fund boards – to also receive renewed attention with the new Senate appearing more favourable to the Coalition. The policy was shelved in August last year after it had failed to secure Senate support. Frydenberg last week indicated the government would revisit plans to dilute the influence of union and employer groups on boards in an interview with the AFR Weekend.

Steffanoni expects to see further public policy activity and industry consultation on a number of contentious policy issues. These include two Productivity Commission recommendations: to decouple superannuation from the industrial relations system, and to implement one of the Alternative Default Models – the most controversial being the "best in show" shortlist.

Funds feeling the heat

Despite the new agenda, super funds are still drowning under a wave of policy changes announced in previous budgets. Also to come through are changes stemming from the Treasury Laws Amendment (Protecting Your Superannuation Package) Bill. Passed earlier this year, this will prevent funds from charging fees exceeding 3 per cent of the balance of an account classified as low balance (less than $6,000), providing opt-out insurance to members with inactive accounts, and charging exit fees on all accounts.

The bill also allows the Commissioner of Taxation to consolidate low or inactive superannuation balances, which in 2015/16 were estimated to number about 9.5 million. Funds with inactive balances of less than $6,000 will be transferred to the ATO, which will then match them to a member’s active account.

is the editorial manager for Morningstar Australia. Connect with Emma on Twitter @rap_reports. You can email Morningstar's editorial team editorialAU[at]morningstar[dot]com

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