‘Stronger super’ implementation and related changes

Budget Review 2012–13 Index

Kai Swoboda

The 2012–13 Budget includes several measures to assist in the implementation of the Government’s ‘Stronger super’ package, the Government’s response to the Cooper Review of superannuation conducted over 2009–2010. These are:

  • funding for the Australian Taxation Office and other agencies for the ‘Superstream’ reforms to improve backoffice administration of superannuation through the use of tax file numbers and standardising data and payment standards
  • funding for the Australian Securities and Investments Commission (ASIC) to develop and maintain an on-line registration system for auditors of self managed superannuation funds (SMSFs)
  • capital gains tax and loss relief for superannuation fund mergers and the consolidation of default member balances in implementing MySuper.[1]

The cost of these measures is partly funded by a combination of a levy on Australian Prudential Regulation Authority (APRA) regulated funds, an increase in the levy applied to SMSFs, and by fees imposed by ASIC (table 1). On balance, the increase in industry levies and ASIC fees ($411.4 million) exceeds the combined cost of total expenditure and capital measures ($406.1 million) over the forward estimates.

Table 1: 2012–13 Budget ‘Stronger super’ implementation measures and offsetting revenue

2011–12

2012–13

2013–14

2014–15

2015–16

Total

Total expenditure

23.4

68.1

97.9

76.1

63.5

329.0

Total capital

13.7

30.4

15.6

9.3

8.1

77.1

Offsetting industry fees/levies

 

 

 

 

 

 

   APRA regulated funds

0

-121.5

-111.1

-83.1

-69.3

-385.0

   SMSF levy

0

-9.0

-5.2

-5.5

-5.8

-25.5

   ASIC fees

-0.5

0.0

-0.2

-0.2

-0.9

   Total

0

-131.0

-116.3

-88.8

-75.3

-411.4

Source: Australian Government, Budget measures: budget paper no. 2: 2012–13, Commonwealth of Australia, Canberra, 2012, pp. 21, 280–281, viewed 14 May 2012

The increase in levies and fees in this Budget follows on from an increase of $66.9 million in the 2011–12 Budget from higher levies on APRA regulated funds for the implementation of MySuper and an increase in the annual SMSF levy to fund a range of tighter regulatory measures.[2] A one-off levy was also introduced in 2011–12 on APRA regulated funds to recover the $55 million compensation package paid to benefit the members of four superannuation funds that were formerly under the trusteeship of Trio Capital Limited.[3] Levies on APRA regulated funds are largely based on the size of each fund by asset value, with a cap on the amount contributed by the largest funds meaning that the largest funds have a lower per member cost than smaller funds.[4]

While the superannuation industry opposed other superannuation measures in the 2012–13 Budget (see the Parliamentary Library’s summary of changes to tax concessions for higher income earners and a deferral of higher concessional contributions caps), the industry welcomed the proposals for capital gains tax and loss relief when it was announced prior to the Budget.[5] A fund and industry group have reported that the increase in levies could lead to an increase in administration fees charged to members but would accelerate consolidation in the sector.[6]

The imposition of levies and charges is a long-established way of funding industry supervision in the financial services industry. However, if levies applied to superannuation funds are passed on to members in the form of higher administration fees, they come at the cost of lower member balances.

The Regulation Impact Statement for the implementation of Stronger Super package did not make reference to the administrative and regulatory costs associated with implementing a range of measures, so it is difficult to assess whether the proposed benefits outweigh the increase in regulatory costs proposed by the Budget.[7] Further, it is unclear whether these additional costs are included in the modelling used to assert the benefits of the MySuper and Superstream reforms, which for a 30 year old worker on average weekly earnings, are claimed to result in an extra $40 000, or 7 per cent, in retirement savings (with around 80 per cent of this attributable to MySuper).[8]



[1].       Australian Government, Budget measures: budget paper no. 2: 2012–13, Commonwealth of Australia, Canberra, 2012, pp. 21, 280–281, viewed 14 May 2012.

[2].       Australian Government, Budget measures: budget paper no. 2: 2011–12, Commonwealth of Australia, Canberra, 2012, pp. 323–324, viewed 14 May 2012.

[3].       B Shorten (Minister for Financial Services and Superannuation), Financial Assistance to Trio's Superannuation Fund Investors, media release, 13 April 2011, viewed 15 May 2012.

[4].       Recent examples include the Superannuation Supervisory Levy Imposition Determination 2011 and the Superannuation (Financial Assistance Funding) Levy and Collection Amendment Regulations 2011 (No. 1).

[5].       Association of Superannuation Funds of Australia (ASFA), CGT relief in fund members' best interests: ASFA, media release, 24 April 2012, viewed 15 May 2012; Financial Services Council (FSC), FSC supports government measures to facilitate super fund mergers, media release, 24 April 2012, viewed 15 May 2012.

[6].       S Patten, ‘Budget 2012: Funds warn of fee rises to cover cost’, Australian Financial Review, 10 May 2012, p. 12, viewed 15 May 2012.

[7].       Treasury, Regulation Impact Statement Stronger Super reforms, 17 October 2011, viewed 14 May 2012.

[8].       Australian Government, Stronger Super Government response key points, Stronger Super website, 23 September 2011, viewed 14 May 2012.

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