Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Assistant Minister for the Republic) Share this | Hansard source

Last week, the Australian Prudential Regulation Authority released some data about funds under management in Australian superannuation funds. It was really instructive data about where Australians are investing their retirement savings, and it once again proves that industry super is the sector that Australians trust and are investing in. Since 2018, the net value of assets held in retail superannuation funds has increased by 3.2 per cent, to $645 billion. Over the same period, assets held in industry super funds grew by 30 per cent, to $814 billion. Australians know which sector of the super industry has the better track record and which performs better, and that is of course the industry super funds sector. These funds consistently have lower fees. They have better performance in terms of returns, and their insurance options are much better and more tailored to the industry in which a particular person works. On the other hand, the retail superannuation sector has had its problems, and many of these problems were highlighted in the Hayne royal commission.

What gets me about this bill, the Treasury Laws Amendment (Your Future, Your Super) Bill 2021, is: why would you want to nobble the part of the industry that is performing the best? Why would you want to put further restrictions on the sector of the industry that gets better performance and better returns and has lower fees for Australian workers? But that's exactly what this bill does. That's why Labor is seeking to amend the bill, to ensure that it is a better piece of legislation and that it actually delivers on the objectives of making super better for Australian workers and ensuring that they have higher returns and lower fees.

This bill continues an ideological attack that the coalition has been pursuing ever since super was put in place by the Labor Party. Those opposite have never got over the fact that workers and employers, working together cooperatively through industry superannuation funds, do a better job at managing workers' retirement savings than the retail sector. It's something that irks them to their bones, and they've never got over that fact. Every opportunity they get, they try and attack industry superannuation on this ideological bent against workers managing retirement savings funds.

Schedule 1 of this bill introduces a system for stapling individual members to a single superannuation account. It applies to anyone who started employment after 1 July this year who has a staple fund and has not chosen a fund through the choice-of-superannuation legislation. This, of course, was a royal commission recommendation. Labor came into negotiations on this issue with an open mind. We were willing to have a look at the issue, and the test that we applied was whether or not workers would be better off. Given what the government has done with this piece of the bill, it's questionable whether someone who is stapled to a fund will be better off, particularly if they're stapled to a badly performing fund, which they have to stick with for the rest of their working career if they don't make a choice to get out of that fund. And let's face it: there are plenty of workers in Australia who don't make active choices about their superannuation.

Some of the problems that we have with this bill go to the mere definition of 'stapled fund'. The bill doesn't outline what a stapled fund is. As with a lot of things this government does, it's saying on this: 'We'll put it in the regulation. We won't put in the primary legislation something that's an important change to the workers retirement savings regime.' The regulation at this stage is only an exposure draft. The regulation contains an obscure definition of a stapled fund, how you determine whether or not someone has a stapled fund and tiebreaker requirements when someone has two funds that could be stapled funds and how that is worked out. As I mentioned, it's part of a trend by this government, which the member for Whitlam has outlined many times in this House, of putting important details, particularly in relation to superannuation and financial services, in regulations, outside the parliamentary ambit and the discussions that we undertake in this chamber.

The other point about this element of the bill is that it's up to the employer to seek information from the tax commissioner about whether a stapled fund exists for an employee. This also is in the regulations. It's more red tape and more inconvenience for employers. The obligation comes onto employers to consult with the Taxation Office about whether or not someone has a stapled fund. Finding out how you do that is not easy, given that it's not even in the law that we're discussing here today but in an obscure regulation that hasn't been written yet. Yet this government expects us to agree to something like that when that particular detail hasn't been provided to any of the parties yet.

The second issue around schedule 1 relates to insurance coverage. This is particularly important for people who work in high-risk professions. What the government is proposing may prevent an industry fund from being the default option for people who work in certain industries, particularly in high-risk industries like the construction industry or the transport industry. The insurance they may be stapled to may not be appropriate for their industry and may not contain some of the protections that workers who ordinarily work in that industry get by being in a superannuation fund that relates to their industry. That's why I mentioned earlier that industry funds do it better, because they have that expertise and because the fund is tailored to the workers who work in that industry, particularly when it comes to insurance. This is a fault in the bill that the government has no solution for.

Schedule 2 of the bill will require APRA to conduct an annual performance test for MySuper products and trustee directed products against benchmarks determined—you guessed it!—by the regulations. If the product fails the performance test, a trustee is required to give notice to beneficiaries that it has failed the test. Again, these are more obligations on trustees that will be passed through in costs to the employees. If a fund fails the test over two consecutive years than that fund is prohibited from accepting new beneficiaries into that product. Again, the details about this are in the regulations, including the circumstances in which APRA has a discretion to depart from the assumptions about comparisons between actual returns and benchmark returns. There is little detail about that. You could drive a truck through it, but no detail about has been provided by the government. There is also the issue of a potential penalty in respect of investments—an Australian-investment penalty, as the member for Whitlam put it—where the government's proposed benchmarks for its performance measures may actively penalise funds for investing in unlisted Australian assets such as venture capital, private equity or infrastructure assets. So there are problems with schedule 2 of this bill in relation to the performance of particular funds and their investment. Again, there is very little detail in the bill; it's all in the regulations.

Schedule 3 introduces a requirement for super fund trustees to act in the best financial interests of their members. This is the schedule which the member for New England, who spoke before me, mentioned he has some issues with. The member for New England gave a very balanced and reasonable speech about the problems with this bill and what it does. It's actively forcing trustees into situations where they may be investing—may be forced to invest—in products that aren't in the best interests of their members. It purports to introduce a requirement that super fund trustees must act in the 'best financial interests' of members. Trustees, we already know, have an obligation to act in the best interests of their members. And guess what? Generally, overwhelmingly, industry funds do a better job of that than the retail funds. It's quite often the retail funds that we see getting into trouble for breaching this duty—we saw all the evidence that was given in the royal commission about that—rather than the industry funds.

Yet this particular schedule of the bill is aimed squarely at the industry funds. Why? It goes back to what I said earlier: their ideological bent against workers managing their own money and their retirement savings. The mob on that side don't like that. They don't like it. This extends that duty again—guess what?—by regulation. It comes through in regulation, and that regulation allows the Treasurer to determine that a particular type of payment is not in the best financial interests of the members of the fund. This is unbelievable. This is really extraordinary, and it sets a very, very dangerous precedent for this parliament to be reaching into the boardrooms of Australia and telling those trustees of superannuation funds—if you extrapolate that out, they can do it in other areas like the boards of companies—where they should be investing the members' funds. That is extraordinary, and that is coming from a Liberal-National government: politicians determining how businesses should be run and, worse still, what the businesses can and can't invest in. It is rather extraordinary for this parliament to be looking into that, but that's exactly what this bill does.

Imagine that applied to companies more generally. Rightfully, there would be an uproar. Yet this government expects the workers of Australia, through the trustees of their superannuation funds, to cop this. It's simply not justified. As I mentioned earlier, industry funds on the whole perform better than retail funds. The proof is in the growth of those funds under management in industry superannuation funds over recent years. So to direct a superannuation fund to invest in a certain area—in a preferred business that fits the ideological ideal views of the coalition—is, when it comes to superannuation, a new low. And it sets an awful precedent for government to be looking into this.

The other element of this section of this particular bill is the reverse onus of proof. Schedule 3 applies a reverse onus of proof, requiring the trustees to prove that they're acting in the best financial interests of their members. This provision was opposed by the Law Council, and is more commonly found in terrorism legislation—not in this sort of financial services legislation. It will create a huge administrative burden for industry funds, and the costs of that burden are likely to be passed on to members, not only for industry funds but for retail funds as well. They'll pass those costs onto members. Retail funds have, on the whole, extraordinarily high fees as it is, and this is another cost that's going to be passed onto those members.

The final point to make about all of this is that these provisions are due to come into force on 1 July 2021. So employers have literally about six weeks, if this bill is passed, to get it into place and to undertake all of these new tests and changes.

When you talk about administrative burden, so much for reducing red tape, which this government claims it's all about. This is a massive red-tape burden that they're imposing on the employers of Australia, every single one of them, from 1 July this year. And guess what? When you try to find out what those obligations are and where the details are, you won't find those in the bill. No, those details are not in the bill. Then you go to the regulations. They're only exposure drafts at this stage, so they're not written either. They're not finalised and they have these obscure definitions that are quite complicated and quite difficult to understand. Yet the government is going to foist this on employers on 1 July this year. It doesn't make sense. It's not practical. It is not living in the real world, and if the government were to be sensible and reasonable about this, they would accept Labor's very reasonable amendments that make this bill workable.

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