O’Dwyer sticks with the super objective

Minister for Revenue and Financial Services Kelly O'Dwyer.

14-Nov-2016

By Daniel Paperny

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Expanding the definition of the purpose of superannuation would open the floodgates for constant political tinkering and would not instil confidence in the legislative framework, according to Minister for Revenue and Financial Services Kelly O’Dwyer.

In a speech delivered at the Association of Superannuation Funds of Australia (ASFA) conference on Friday, O’Dwyer acknowledged the government had received different inputs from a variety of stakeholders on the objective of super.

She noted the government had paid heed to these submissions during its consultation process, which helped in the formation of explanatory materials for the Superannuation Objective Bill.

“As David Murray, who headed the FSI [Financial System Inquiry of 2014] recently said, to include subjective words would open the way to constant political interference,” O’Dwyer said.

“Moreover, the government is acutely aware that there is no consensus on how concepts such as ‘adequacy’, ‘comfort’ or ‘dignified’ are understood, let alone measured.”

It was for these reasons, O’Dwyer said, that the government had decided to go ahead with a “simple, unambiguous objective” that did not contain subjective concepts that could raise further legal interpretation questions.

Currently, the proposed objective for super, as set out in the government’s exposure draft legislation, is that it should “provide income in retirement to substitute or supplement the age pension”, a measure taken from a key FSI recommendation.

As part of its super reform package, the government had also moved to extend the earnings tax exemption to innovative income streams in the retirement phase, regardless of whether such income streams were currently payable or deferred.

O’Dwyer said this was the first step towards the development of comprehensive income products for retirement (CIPRs).

“This government is focused on getting the policy settings right for the retirement phase … ensuring retirees can choose from [a] range of retirement income solutions, such as those that help manage longevity risk,” O’Dwyer said.

“Extending the earnings tax exemption … will help remove barriers that are getting in the way of innovative new retirement income products, such as deferred lifetime annuities.”

O’Dwyer said while the industry had work to be done to implement the changes by 1 July 2017, the government remained committed to giving Australians more choice when it came to managing their retirement income.

“In the coming months we will consult on how new products will be treated under the age pension means test,” she said.

“We will also be releasing a discussion paper this year that will explore the key policy issues for developing a framework for CIPRs.

“Of course, CIPRs is a complex policy area [but] it’s something we need to get right.”

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