Australia’s small business leaders have reinforced a push for employers to be taken out of the superannuation process entirely as the banking royal commission’s focus switches to the $26 billion industry this week.
A slew of big-name super funds will face scrutiny over the next two weeks as the royal commission scrutinises governance issues and selling practices, and assesses the effectiveness of super regulators such as the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA).
First under the microscope was NAB’s superannuation trustee, NULIS Nominees, and its subsidiary MLC. The commission heard the bank held back details from ASIC around fees it had charged to about 220,000 fund members, despite them receiving no service.
At the launch of this week’s proceedings, senior counsel assisting Michael Hodge warned Australians that those who manage local super funds are by and large “left alone in the dark with our money”.
“Trustees are surrounded by temptation, to preference the interests of their sponsoring organisations, to act in the interests of other parts of their corporate group, to choose profit over the interests of members, to establish structures that consign to others the responsibility for the fund and thereby relieve the trustee of visibility of anything that might be troubling,” Hodge said.
“Their duties oblige them to resist all of these temptations … what happens when we leave these trustees alone in the dark with our money? Can they be trusted to do the right thing?”
More revelations about NAB and other super funds are likely to emerge, but in the meantime, Council of Small Business Organisations Australia (COSBOA) chief executive Peter Strong has reinforced his call for superannuation responsibilities to be taken out of the hands of employers and placed into the hands of the Australian Taxation Office.
Super should go in with PAYG
Strong’s view is that employers should be able to include the mandated superannuation payments in an employee’s Pay-As-You-Go tax instalments, and then it should be the responsibility of the employee to tell the ATO where to send their super.
It’s not a new suggestion from Strong, but with the recently released Productivity Commission report into superannuation calling for Australia’s super system to “better meet the needs of a modern workforce”, plus the heat from the royal commission, he thinks now is as good a time as any to seriously consider the suggestion.
“Taking employers out of the systems is a lay-down misere, and it changes the complete dynamics,” he says.
“Number one, it takes away a lot of time and effort for businesses and removes a lot of confusion for employees — especially younger ones — over who owns their super.
“Number two, it means the people who own their money have much more control over it. It changes the dynamic in a really good way.”
Strong thinks the only losers in this situation would be the super funds’ debt collectors, and in a submission to the royal commission, COSBOA said these debt collectors regularly make claims against small businesses even where “there is inadequate evidence to make such claim”.
It would also significantly reduce the number of transactions and red tape around super registration, says Strong, who believes the tax office dealing with super could cut down on “probably trillions” of transactions between employers, employees, and super funds.
Funds “exist for the fund, not for the member”
With the royal commission underway, and the banks reeling from previous hearings, Strong is hopeful “common sense will prevail” and suggestions will be made to change the super collection process. He’s also hoping for a general increase in transparency and oversight, especially from the corporate regulators.
“I know the government has been looking to improve the administration of super for a long time now, and if a director of a fund right now breaks the law, no one can fine them. ASIC and APRA both say it’s not their problems,” he says.
“We’ve got to bring super into the world of due diligence and transparency. I don’t trust most of the big super funds because they exist for the fund, and not for the member.”
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