A measure within Schedule 3 of the Your Future, Your Super bill is setting a “very dangerous” precedent and could cause a “red tape nightmare” for super fund trustees.
Under Schedule 3 of the Your Future, Your Super bill, it amends the Superannuation Industry (Supervision) Act to allow regulations that specify certain payments or investments made by trustees or registrable superannuation entities would be prohibited, or prohibited unless certain conditions were met.
Speaking at the second reading of the bill in the House of Representatives on Wednesday, members Zali Steggall and Matt Thistlethwaite highlighted problems with the measure.
Steggall, independent member for Warringah, said it gave the Treasurer, Josh Frydenberg, the power to overrule the fiduciary duty of superannuation fund trustees. She said the government had also yet to issue forward guidance on which activities the restriction would apply to.
“Of all the sections in this bill, this one is the most alarming for my constituents in the feedback I have received. They fear that it could be used to block investments in clean technologies or programs that promote social good,” she said.
“To remedy this, the government should amend the provision to that banning of investment activities so that it must meet a public interest test and must be first referred to the minister by APRA at the very least.”
She also read comments by the Australian Industry Group which stated: “The approach would create a red tape nightmare in the oversight of superannuation funds. Instead of concentrating on running funds in the best interest of their members, funds would be embroiled in compliance with an exceptionally intrusive regime”.
Her comments were echoed by Labor member, Matt Thistlethwaite, of Kingsford Smith who said the measure was setting a “very, very dangerous” precedent.
“[This] 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,” he said.
“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.”
Countering, Liberal member, Andrew Wallace of Fisher, said Schedule 3 would “stamp out” poor management practices by super fund trustees.
“The bill will simply ensure that trustees have an obligation to act specifically in the financial interest of members rather than other interests-what we call fiduciary obligations.
“As recommended by the Productivity Commission, it tightens up record keeping and transparency obligations and ensures that APRA can make additional regulations where it's necessary to hold trusties to account.”