Government needs to re-examine superannuation legislation

While it is clearly not high on the current Federal Government’s agenda, at some point it will need to revisit legislation covering the operation of superannuation funds in Australia with a view to ensuring it better reflects current fact and practice. 

It will not emerge as an item high on the current Federal Government’s agenda, but at some point, the Commonwealth will need to revisit legislation covering the operation of superannuation funds in Australia, with a view to ensuring it better reflects current fact and practice. 

A revision of the legislation is necessary in circumstances where there is now clear evidence that the underlying structures have not kept pace with the evolution of a dynamic industry, and where some organisations have sought to manipulate the resulting inconsistencies for their own commercial and political advantage.

The Government has undertaken that next year it will refer the issue of default funds under modern awards for consideration by the Productivity Commission. It should go further by extending that referral to examine issues such as the structure of trustee boards and the application of the sole purpose test.

A few weeks ago, Tasmanian Liberal Party Senator David Bushby took the extraordinary step of writing a column for Money Management in which he pointed out that he had asked questions of the Australian Prudential Regulation Authority (APRA) regarding events surrounding MTAA Super.

In that column, Bushby reported that having asked what were “hardly earth-shattering or market bursting” questions, he was confronted by the regulator utilising the secrecy provisions of its parent Act to avoid providing answers.

What APRA was essentially telling an elected member of the Australian Parliament was that information relating to the activities of a major superannuation fund falling under the jurisdiction of a key financial regulator could not only be kept out of the public domain, but kept away from the scrutiny of the Parliament.

It seemed to not matter to those running APRA that the trustee board of MTAA Super controls billions of dollars in funds belonging to literally thousands of individual members in the automotive industry. Nor does it seem to have mattered that many of those individual members might have been interested in reading the answers to the Senator’s questions.

While it is important for regulators to avoid taking any action which would undermine the security and value of members’ assets within a superannuation fund, that objective should not be pursued to the exclusion of necessary transparency.

Under Australia’s current superannuation legislation substantial power and discretion is vested in the members of trustee boards, while individual members are denied a voice beyond indicating or specifying the broad investment allocation of their money.

Superannuation funds enjoy a special status in Australia, owed to the compulsory nature of the superannuation guarantee and the consequent tax advantages which apply. This should result in greater transparency than is currently the case.

In short, the activities of the trustee board of MTAA Super should be just as transparent as those of the board of any publicly-listed financial institution, and there should be no reason for the regulator to find reasons to invoke secrecy provisions when dealing with Members of Parliament.

Change is not only necessary – it will ultimately prove unavoidable.