Sunsuper was reported to have declared an $11,000 payment to the Queensland Labor Party to sponsor a corporate breakfast event last year.
During a Senate estimates hearing in March, Mr Bragg had grilled the prudential regulator on its views of political donations from super funds, pointing to the Sunsuper case.
At the time, APRA deputy chair Helen Rowell said the regulator does not have a view on funds making political donations, considering the $11,000 payment in the context of a $60 billion fund as “immaterial”.
The sole purpose test, as outlined in the SIS Act, requires a super fund is maintained for the sole purpose of providing retirement benefits to members.
Mr Bragg had argued political donations should be considered a breach of the test, given that funds that do not hold shareholder capital would be using members’ contributions to fuel the payments.
While APRA had deemed it would be difficult to prove the Sunsuper payment had breached the sole purpose test, the fund has now stated that the payment breached its own policy and it will not be making political donations in future, as reported elsewhere.
Sunsuper did not respond to Investor Daily before the deadline.
Mr Bragg told Investor Daily he welcomes Sunsuper’s statement, but his focus is primarily on APRA and its interpretation of the sole purpose test, calling it the most “troubling part” for him.
“I’m surprised by the letter they’ve sent me, which effectively… gives a green light to political donations even though the fund itself has pulled back” he said.
“We as a government and a country are heavily invested in this scheme. I don’t want to see breaches of the sole purpose test and APRA’s judgement that this is not a breach… I think is wrong. And if that is their position based on the current law, then we clearly need new law.”
In his book, Bad Egg, Mr Bragg has published projections based on Australian Electoral Commission data on the superannuation sector’s donations to trade unions, forecasting industry funds are set to become the largest political donors.
There needs to be clarity around what the “sole purpose test is designed to do and how it operates”, Mr Bragg said, commenting the government has a duty to constituents to ensure retirement savings are not “funnelled off to political parties”.
“I think it is inappropriate for super funds, particularly those without shareholder capital to be making these sorts of donations. It’s very hard to see how a political donation could satisfy the sole purpose test,” Mr Bragg said.
“If APRA’s view of the sole purpose test is that it permits political donations, that is wrong. And it shows that either APRA or the law, or both, are failing superannuation members, the people of Australia.”
In a letter sent to APRA chair Wayne Byres in May, Mr Bragg pointed to Ms Rowell’s comment that the Sunsuper payment had been immaterial, saying: “Based on this logic, APRA is implying that small donations to political parties do not matter.
“Yet the sole purpose test does not refer to materiality.”
In her responding letter to Mr Bragg, Ms Rowell said the regulator had sought information from Sunsuper and understood the payment was related to the fund’s involvement in a business liaison event.
“Based on the information available, and taking into account all of the circumstances, APRA’s view is that it would be difficult to demonstrate objectively that the payment breached the sole purpose test,” Ms Rowell wrote to the senator in June.
Ms Rowell had also stated in the letter that under its supervisory work, the regulator routinely assesses whether the “material actions by RSE licensees meet the requirements of the sole purpose test”.
“Licensees need to weigh up the cost of any proposed expenditure and the benefits the expenditure is proposed to deliver and be able to demonstrate such consideration,” she wrote.
“In circumstances where an RSE licensee expends or invests members’ money in good faith, and can point to analysis that supports the outcome the expenditure or investment is expected to provide and its connection to superannuation purposes, the RSE licensee’s action is unlikely to breach the sole purpose test.”
An APRA spokesperson told Investor Daily the regulator is investigating the Sunsuper matter and is awaiting a response from the fund.
Meanwhile Sunsuper is in the midst of completing due diligence on its potential merger with QSuper.
The consolidation of the two funds could result in one of Australia’s largest superannuation funds, with more than $195 million in funds under management.
