While the Senate economics legislation committee recommended that the bill be passed – acknowledging “the broad in-principle support for the policy intent of the bill” – Labor senators on the committee held a dissenting view and warned that they would not support the bill in its current form.
“This bill as written will not deliver better outcomes for Australian superannuation members,” the senators wrote in their dissenting report.
“The evidence provided to this inquiry makes it clear that the government’s proposed approach to superannuation would damage retirement outcomes for ordinary Australians, and subject our superannuation system to considerable risk.”
At issue is the so-called investment veto power, the possibility that members might be stapled to underperforming funds, and the failure of the reforms to cover all APRA-regulated funds and the “flawed performance measurement” – two issues that have since been addressed in sweeping changes announced by Treasurer Josh Frydenberg.
“It should be noted that this bill delegates significant power to legislative instruments. As the government has only released partial draft regulations for this bill on the day before this report is due to be finalised, it is impossible for the committee to fully assess the impacts of the bill on the superannuation system,” the senators wrote, noting that regulations had not been presented in a “timely fashion” allowing the legislation to be reviewed as a whole.
While the recently announced changes to YFYS are likely to make the bill more palatable – and so make it more likely to pass through Parliament – a number of funds and politicians have voiced objections to the investment veto power, which remains a key feature of the reforms.
“Expert evidence presented at the inquiry, including from the Institute of Company Directors and the Australian Industry Group, shows these extraordinary powers would create a ‘Sword of Damocles’ over every super investment in Australia,” said shadow finance minister Stephen Jones.
“The powers would undermine confidence for large international investors looking to partner with super funds, undermining Australia’s ability to attract capital. And they would blur the lines of accountability for fund managers and the boards which oversee their investments.”