In a submission to the Senate Economics Legislation Committee, the Australian Council of Trade Unions (ACTU) has voiced its opposition to the Treasury Laws Amendment (Self Managed Superannuation Funds) Bill 2020.
The proposed legislation would increase the maximum number of members of an SMSF from four to six. This would, according to the Bill, “[increase] choice and flexibility for members” and reduce the extra costs associated with having to create separate SMSFs for other family members who exceed the current limit.
According to the ACTU, though, these changes “[highlight] the priorities of the Abbott-Turnbull-Morrison Governments for superannuation to make it work better for the wealthy.” Justifying this, the submission notes that, per ATO data, 70% of SMSFs have two members and 23% have a single member.
“Instead of focusing on a small wealthy segment of the population,” the submission continues, the ACTU recommends making multiple changes that benefit the super balances of lower-income workers.
These include:
- Urgently removing the $450-per-month minimum threshold for superannuation guarantee eligibility
- Paying super on paid and unpaid parental leave
- “Acting on the nearly $6 billion per year of superannuation theft”
- And, finally, “[restoring] the savings of three million workers who were forced to withdraw their superannuation to get by including the more than 600,000 Australians who have drained their entire superannuation balance due to inadequate Government support.”
Further, the ACTU’s submission argues that the Bill encourages the usage of SMSFs “without proper enquiry into their deficiencies,” such as performance issues highlighted in the final Productivity Commission report for SMSFs with less than $500,000 in assets.
Because of this, the ACTU believes that “any expansion of the SMSF operating powers could provide further opportunity for poor financial advice,” such as the “conflicted remuneration, exorbitant fees, poor performance, fees for no service and charging fees to the dead” examined during the Royal Commission.
The submission concludes: “This Bill is simply another attempt by the Morrison Government to prioritise the wealthy with more generous SMSF rules to make it even easier to transfer their wealth to the next generation.
“The result will be an even greater gap between workers’ retirement outcomes and the already wealthy that will extend into the next generation.”
The submission also notes that the changes “assume a sufficient level of financial literacy within the general community.” Lack of financial literacy, and how the superannuation sector is working to address this to increase member engagement, is something discussed in detail in the latest season of After Hours.
By contrast, the Association of Financial Advisers supported the Bill in its own submission, arguing that the changes will allow larger families to participate in a single SMSF, enable the continuing operation of intergenerational SMSFs, increase the level of funds within individual SMSFs and reduce per-member operating costs.
“We are conscious that 93% of SMSFs are currently one- or two-member funds,” the AFA adds, “and therefore the increase in the maximum number of members from four to six is unlikely to have an impact on the vast majority of funds. This change will have a more targeted impact, and most likely be limited to use by larger families.”
Ultimately, though, the AFA believes that the changes are appropriate.
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