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P a g e
12/02/2018
Robert Jeremenko
Retirement Income Policy Division
The Treasury
Langton Crescent
Parkes ACT 2600
Dear Mr Jeremenko
Re: AUSTRALIANSUPER SUBMISSION TO TREASURY – CONSULTATION
PAPER ‘EARLY RELEASE OF SUPERANNUATION BENEFITS’
AustralianSuper welcomes the opportunity to respond to the Consultation Paper
above.
About AustralianSuper
AustralianSuper is Australia’s largest single superannuation fund and is run only to
benefit members. We don’t pay commissions to anyone to recommend us, nor do we
pay dividends to shareholders. The fund has over 2.2 million members and manages
over $130 billion of members’ assets. Our sole focus is to provide the best possible
retirement outcomes for members.
This submission addresses a number of questions from the consultation paper and
makes the following key points:
AustralianSuper believes that the purpose of superannuation is to provide
adequate retirement incomes for Australians to improve quality of life in
retirement. Therefore AustralianSuper supports the early release of
superannuation only in very limited circumstances and believes the release
of superannuation benefits should generally be more difficult to obtain.
A significant uptick in the applications and approvals for early access to
superannuation for specific physical or mental health conditions should act
as a signal to government that the healthcare needs of the Australian
population are not being adequately served by Australia’s healthcare
system.
On average, women’s’ long-term financial well-being is already under
considerable stress due to structural inequities. Victims of domestic
violence - disproportionately women - should not be required to trade their
quality of life in retirement in order to be financially capable of escaping an
abusive partner.
The idea that a provision for the early release of superannuation benefits is
a legitimate answer to help women escape violent domestic situations
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underscores the critical need for a review of the adequacy of Australia’s
social security system and crisis assistance for victims of domestic
violence.
The current test for early release on the grounds of financial hardship is
subjective and therefore consumer experience across funds differs.
AustralianSuper proposes that subjectivity should be eliminated from
legislation to ensure fairness and consistency of experience for the
consumer across the industry.
Renters and mortgage holders should have equal rights in accessing a last
resort mechanism in superannuation to protect them from being made
homeless.
Where a perpetrator has made superannuation contributions in order to
avoid paying court-ordered compensation, a victim should have access to
those contributions.
Consideration should be given as to whether granting a victim access to a
perpetrator’s superannuation may unfairly infringe on spousal entitlements
to the same superannuation monies.
Principles Underpinning Early Release
AustralianSuper supports the principle to allow access where the benefits of early
access to superannuation for an individual exceed the benefit of preserving balances
until retirement.
AustralianSuper does not believe that early access should be generally easier to
obtain.
Since the original grounds for early release of superannuation were established, only
a small fraction of overall superannuation assets have been paid out as early release
benefits. The relatively stable number of applications for early release of
superannuation benefits, up until at least 2012, indicate that for the most part the
system has established a balance between competing principles of preservation,
genuine hardship, last resort and fairness that has been reasonable. On this basis
AustralianSuper supports the early release of superannuation under the very limited
circumstances described.
Early Release on Compassionate Grounds
Medical Grounds
AustralianSuper believes that the purpose of super is to provide adequate retirement
incomes for Australians to improve quality of life in retirement. The purpose of
superannuation is not and should never be to underwrite government responsibility to
provide adequate and affordable healthcare options for Australians suffering severe
mental health and other life threatening conditions. Further, Australians should not be
compelled to trade off the quality of their life in retirement for their health in their
working life. Australians should be able to access adequate health services to treat
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severe mental health disturbances and life threatening conditions affordably through
Australia’s health care system.
It is clear from the data that the increase in applications and approvals for the early
release of superannuation on compassionate grounds is out of step with historic data
and deserves investigation.
Indeed, the increase in these types of applications signals that the changing health of
Australians and their needs are not yet adequately supported by Australia’s
healthcare system. A significant uptick in the applications and approvals for early
access to superannuation for specific physical or mental health conditions should act
as a signal to government that the healthcare needs of the Australian population are
not being adequately served by Australia’s healthcare system.
In addition, it may signal an increase the intermediation of the early release of
superannuation on compassionate grounds. Intermediaries involved in the early
release of superannuation have long existed in Australia and in some cases target
vulnerable Australians. In addition, intermediaries may charge a percentage-based
fee in order to provide assistance in accessing superannuation earlier. Charging a
percentage-based fee is unconscionable and mechanisms to protect people from
being exploited by intermediaries is necessary.
Funeral expense grounds
AustralianSuper believes there should be a maximum amount that can be released to
meet funeral expenses and burial expenses. Keeping in mind the principle of
preservation, it is unreasonable that when accessing superannuation benefits early
for funeral and/or burial expenses that there is no cap. Unlike medical treatment or
palliative care, funeral and burial expenses are a common fixed cost, the average of
which is relatively easy to quantify. On this basis, the regulator setting a maximum
withdrawal is fair.
Other potential new grounds - Victims of domestic violence
The consultation paper suggests that several stakeholders have raised with Treasury
the possibility that the provisions for early release of superannuation be extended to
for victims of domestic violence in order to meet short-term financial needs.
Accessing superannuation benefits prior to retirement places a person’s short-term
well-being in direct contrast with their long-term well-being. As victims of domestic
violence are disproportionately women, a provision for early release of
superannuation benefits for domestic violence victims places the well-being of those
women in retirement in jeopardy.
On average, women’s’ long-term financial well-being is already under considerable
stress due to the structural inequities inherent in employment and workforce
participation in Australia, and the way women’s roles as caregivers are valued in
society. On average, female members of AustralianSuper have 40% less in
accumulation accounts compared to male members. According to ASFA, women are
currently retiring on an average balance of $157,050 compared to an average
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balance for men of $270, 710.
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Furthermore, single older women represent the
fastest growing group among the homeless in Australia.
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The purpose of superannuation is not to underwrite government responsibility to
assist victims of domestic meet short-term financial needs. Victims of domestic
violence should not be required to trade their quality of life in retirement in order to be
financially capable of escaping an abusive partner.
To the extent that the early release of superannuation benefits appears to
stakeholders involved in supporting victims of domestic violence as a legitimate way
to help those victims escape violent domestic situations underscores the critical need
for a review of the adequacy of Australia’s social security system and crisis
assistance for victims of domestic violence.
Housing Grounds
AustralianSuper does not believe that there is a fundamental difference between
meeting mortgage payments and meeting rental payments to warrant a difference in
treatment in early release provisions of superannuation. Thus to the extent that
superannuation benefits may be released early to enable an individual to maintain
their principal place of residence and avoid homelessness, the same rights should be
extended to renters otherwise facing homelessness. The immediate consequences
for the loss of one’s home are broadly similar for mortgage holders and renters. Thus
an individual wishing to access a last resort mechanism to maintain their principal
place of residence should not be discriminated against on the basis of their prior
inability to buy a property or their choice not to do so.
AustralianSuper believes that this rule in particular requires updating to keep pace
with the declining trend of home ownership in Australia.
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An appropriately high threshold for release should be set with reference to evidence
of imminent eviction and subsequent homelessness. Maximum limits for withdrawal
should also be set to avoid system manipulation.
The legislation does not currently set maximum limits for withdrawal on the basis of
meeting mortgage payments. In developing a maximum limit for renters a similar
maximum limit should also apply to mortgage holders. The original spirit of the
provision was to provide people a second chance to find work and/or improve their
financial situation without becoming homeless. Regulation should not provide
recurring opportunities for mortgage holders and renters alike to avoid foreclosure or
eviction.
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ASFA (2017) Superannuation Account Balances in Retirement by Age and Gender
https://www.superannuation.asn.au/ArticleDocuments/359/1710_Superannuation_account_balances_
by_age_and_gender.pdf.aspx?Embed=Y
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St Vincent De Paul Facts about Homelessness https://www.ceosleepout.org.au/facts/
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Census, HILDA Data
https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/
rp1617/Quick_Guides/TrendsHomeOwnership
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Early Release the Grounds of Financial Hardship
Unlike the early release of superannuation benefits on compassionate grounds, the
ultimate discretion to release superannuation benefits on grounds of financial
hardship lies with the trustee of a superannuation fund. Current regulations state that
a trustee must be satisfied based on written evidence that the person has received a
qualifying Commonwealth income support payment for a continuous period of 26
weeks and that the ‘person is unable to meet reasonable and immediate family living
expenses.’ However, current regulations do not prescribe the specific matters that a
trustee must take into account in order to meet the second element of this objective.
As such, the early release of superannuation benefits on the grounds of financial
hardship becomes subjective and consumer experience across funds subsequently
differs.
AustralianSuper believes that this fails the principle of fairness and effectiveness. In
order to ensure fairness and consistency of experience for the consumer across the
industry, AustralianSuper proposes that the second element of the objective – that a
trustee much be satisfied that the person is unable to meet reasonable and
immediate family living expenses – should be eliminated from legislation. Therefore
written evidence that the person has received a qualifying Commonwealth income
support payment for a period of 26 weeks should be adequate evidence for a trustee
that the member is in financial hardship. In addition, the legislation should override
anything in a trustee’s governing rules which imposes a higher requirement.
The alteration of the current legislation to the suggested simpler test will also prevent
consumers from opening new account and transferring superannuation balances for
the purpose of finding a superannuation fund that will honour their claim for the early
release of super on financial hardship grounds. This will also prevent the cross-
subsidisation of administration costs by members in funds which typically honour
financial hardship.
In addition, AustralianSuper proposes that the current test that a person must have
received a qualifying Commonwealth income support payment for a continuous
period of 26 weeks should be altered to consider the cumulative receipt of a
qualifying Commonwealth income support payment rather than the continuous
receipt of the payment. The current legislation provides a disincentive for a person
experiencing financial hardship needing to access their superannuation from
accepting ad-hoc or casual work over a short period of time because this may break
the 26 week continuous receipt requirement.
AustralianSuper also believes the amount and frequency with which a person can
access early release of superannuation on the grounds of financial hardship should
be capped. A centralised system run by the Australian Taxation Office (ATO) should
be designed to ensure that the amount and frequency with which a person is
accessing early release of superannuation is recorded. In the event of an early
release claim, the ATO should share information with trustees on previous records of
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granted early release benefits in order to prevent a person from opening a new
account with another superannuation fund for the purposes of accessing early
release beyond stipulated maximum limits.
Victims of Crime Compensation
AustralianSuper supports the access of superannuation to victims of crime
compensation in limited circumstances. Where a perpetrator has made contributions
to their own superannuation account or a third party’s account in order to avoid
paying court-ordered compensation, the victim of crime should have access to those
superannuation contributions.
In the event of bankruptcy, superannuation account balances are protected except
where contributions have been made to superannuation to defeat creditors. In
determining this claim, the law considers whether the recent pattern of making
contributions is out of step with the pattern of contributions prior to bankruptcy.
AustralianSuper believes a similar review of a perpetrator’s pattern of contributions
could be used in order to determine if the perpetrator has used superannuation
contributions as a way to avoid paying compensation to a victim.
In general, AustralianSuper does not support broader access of a perpetrator’s
superannuation to a victim of crime because one superannuation account is often
shared by two people in retirement. In particular where one spouse has acted as a
homemaker throughout their earning years or has been a low income earner.
Any decision to grant access to superannuation benefits needs to carefully take into
account competing claims from spouses and other financial dependents. Granting a
victim access to a perpetrator’s superannuation may unfairly infringe on the rightful
claim of financial dependents to the same benefit. As such any provision which
allows victims of crime to access perpetrator’s superannuation must, at a minimum,
consider whether a perpetrator has financial dependents and prioritise such
dependents entitlements to the superannuation monies.
If you have any questions of us or would like further information please do not hesitate
to contact Claire Heeps on 03 8648 3848 or cheeps@australiansuper.com in the first
instance.
Yours sincerely
Louise du Pre-Alba
Strategic Policy Advocate
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