Treasurer Announcement – Objectives of Superannuation

23 February 2023

You may have heard that the Federal Treasurer, the Honorable Jim Chalmers, released a consultation paper on 20 February 2023 with draft wording for the objectives of superannuation in Australia to be enshrined in Legislation.

The proposed wording is as follows:

“The objective of superannuation is to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way.” 

This is the second release since 2014 of proposed wording – initially undertaken by the previous government based on recommendations made in the 2014 Financial Systems Inquiry.  Draft legislation released in this regard in 2016 lapsed in 2019 given agreement couldn’t be reached on the wording.

Implied Criticism of Current Superannuation

The announcement on 20 February had substantial press attached to it, particularly with respect to comments regarding limiting the ability for Australians to access their superannuation too early, which arguably wouldn’t align with the above objective.  This included criticism of the COVID-19 measures that enabled those Australians who had lost their jobs or had a substantial cut to their income as a result to COVID to access up to two lots of $10,000 from their superannuation.  Indeed, this did result in many Australians then no longer having superannuation benefits. However, it is considered by most Australians that it was appreciated and necessary to ensure that they were able to be financially viable. 

That measure was temporary, and there are very limited other circumstances where individual’s can access their superannuation prior to retirement, restricted to compassionate grounds or because of financial hardship.  These provisions are quite difficult to be eligible for, and have limitations on what can be accessed, but have been a welcome backstop for many Australians to ensure that they could pay for vital medical treatment, or ensure that the bank wouldn’t foreclose on their home.  There have been proposals to enable those subject to domestic violence to be able to access the superannuation of the offender in order to move on with their lives and rebuild. 

Superannuation is to provide for the retirement of Australians, which is why even the exceptions outlined above are difficult to qualify.  The intention of super providing for retirement is also reflective in the concessional taxation treatment of superannuation, incentivising the accumulation of superannuation through contributions, especially given access to superannuation is not until at least age 60 (currently). 

Superannuation in Australia is one of the most robust pension and superannuation systems in the world, and has been accredited in past as being the reason that Australia isn’t as badly afflicted by global shocks to economic markets. given the regular superannuation guarantee contributions being made to superannuation by employers (currently 10.5% of salary).  It is also the most tax effective investment vehicle in Australia, which is one of the reasons that many Australians aim to build up wealth within such structures for their retirement, and also over their lifetimes to manage the tax position of their family. 

The tax-effectiveness of super has resulted in some substantial wealth being accumulated within superannuation – particularly for those Australians who had the capacity to make significant contributions to superannuation from their available resources pre 2006 when there was no limit on the level of contributions that could be made from after-tax money to superannuation.  This is further enhanced by investment returns experienced since that time, and also the fact that there is no requirement (unlike prior to 2007) for individual’s to withdraw money out of superannuation where they are not working and have reached retirement age. 

The level of wealth that is in some superannuation accounts is due to be paid out of superannuation over the next 10 to 20 years.  This is because upon the passing of a member who may have a substantial super account, the bulk of it must be paid out of the superannuation environment, even where they have a spouse, as the spouse is only able to retain an amount within superannuation up to their Transfer Balance Cap. 

Accordingly, the main criticisms of the current superannuation platform are:

  • there are circumstances when people have been able to access their retirement savings in recent times that shouldn’t be permissible, as superannuation should be to provide for retirement and ensure that our system is sustainable.
  • Superannuation is not a vehicle to build substantial wealth in a tax effective way – it is to provide for a dignified retirement, and therefore it is inappropriate for there to be large member balances in superannuation.

Previous Substantial Changes to Superannuation

Over the past 20 years, there have been two substantial changes to superannuation (of most note) that required consideration for many Australians, particularly those at or approaching retirement:

  • In 2007 with the introduction of superannuation contribution limits, removal of Reasonable Benefit Limits making pensions, and any super drawdowns over age 60 being tax-free.
  • In 2017 with the introduction of the Transfer Balance Cap, limiting the amount of assets that could be held in retirement phase pension accounts that were exempt from tax, and further limiting the contributions being able to be made to superannuation. 

Implications of the Announcement

It is understandable that with the proposed objectives announced, there is some concern regarding what this announcement means for superannuation savings going forward. 

For now, the proposed wording is subject to consultation, due 31 March 2023, where professional bodies and other interested parties will provide their feedback on the proposed wording. 

Where any legislation in this regard is introduced and passed by parliament, it in itself doesn’t mean that there will be substantial changes to superannuation That is the overriding objective of enshrining the objective is to prevent any substantial changes in the future and unnecessary tweaking, whilst ensuring that Australian’s have confidence in the system where a reasonable amount of their salary is directed to superannuation from a young age. 

It is acknowledged, that the passing of legislation in this regard does then pave the way for changes in the future by a Government, where the basis of those changes may be from an equitable and sustainable perspective, in accordance with the objectives. 

It is impossible to crystal ball gaze in this regard, and indeed if any adverse changes were proposed, there would be substantial consultation and feedback from the industry, and also lead-time in order to make any strategic changes as required. 

The Next Steps

As and when there is at least draft legislation, we can at that point meaningfully speculate regarding any subsequent changes that may be announced.  The federal Budget on May 9 2023 will provide further insight in this regard, and either confirm or deny other rumours that have been circulating regarding limiting the amount of assets that people can accumulate overall in superannuation. 

Accordingly, we suggest no action is required until further announcements.  It is not necessarily advisable (where you might be eligible) to be withdrawing your superannuation pre-emptively for changes that may not occur. This is particularly given that the ability to make contributions to superannuation under current legislation is restrictive. 

If you would like further details or assistance with respect to any of the above changes, superannuation in general, or wish to have your position reviewed in light of the above, please contact our Superannuation Team.


Jemma Sanderson
Head of SMSF & Succession

Financial Adviser No:
001 000 382

Matt Miceli
Senior Manager
UK Pension Transfers

Christie Butler
Senior Manager
Estate Planning

Lindzee-Kate Tagliaferri
SMSF Services

Chrisselle Kelly
SMSF Services

This newsletter is current as of 23 February 2023, however, please note that announcements and changes are being made by the Government and the ATO regularly, and we expect that the tax and business-related responses will continue to evolve.  Before acting upon the content of this newsletter, please contact us to discuss how the above applies to your specific circumstances.

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