The Trade Minister thinks our super funds should buy American to keep Donald Trump happy. There’s just one problem, and every financial planner knows its name: the sole purpose test.
Pressured by Donald Trump’s 12.5% tariffs, the Trade Minister Don Farrell could be treating our super funds like sheep that could end up like lambs to the slaughter. In simple terms, Farrell wants our super funds to invest in the US lamb industry in exchange for no tariffs that could really hurt an industry that makes up 80% of all US lamb imports.
Arguing his case that he has taken to a G20 trade ministers’ meeting in Milwaukee, where he talked with US Trade Representative Jamieson Greer and Agriculture Secretary Brooke Rollins, Farrell might be on shaky superannuation ground.
According to The Australian, he contends that “super funds had an obligation to assist the national interest and boost trade to the US, arguing that private sector companies could also expand their American investments to help escape the potential tariff hit.”
However, I have gone through the stated goals of our biggest industry super fund, AustralianSuper, and nowhere in its five goals did it say it had a national interest to help a specific industry, let alone be forced to help US lamb producers to offset Trump’s selfish, America-first tariffs.
As a financial planner, I know when I construct a super fund portfolio for a client I am driven by the first and most important rule of super, which says my investments must pass the sole purpose test.
This is how superguide.com.au defines this test: “If any super fund transactions or decisions are deemed by the ATO to provide significant, non-incidental, direct or indirect financial benefit to fund trustees, members or related parties before retirement, the trustees are in breach of the sole purpose test.”
Let me tell you this, I avoid investing in agriculture for my clients because these great businesses, run by heroic gutsy farmers and graziers, are always open to droughts, floods, fires, mouse infestations, crop diseases and crazy government regulations!
At best, for a super client who wants reliable and relatively safe investments, agriculture is a speculative play, and a trade minister should not be trying to force the investment committee of our big industry super funds to use members’ monies to help any industry, unless there was a good chance of making at least reasonable returns compared to other investments.
Right now, it can be argued that the Albanese Government is already hurting the returns of our super funds because government spending has been named this week by even the former RBA Governor, Dr Phil Lowe, as a significant cause of our high inflation. That has led to us having the second highest interest rates in the OECD behind Iceland.
And that explains why our S&P/ASX 200 index for our stock market is down 3.7% for the year, while the US S&P 500 is up 14.44%. Even politically mired UK’s stock market is up 10.3% for the year!
A good government helps to create a good economy that lifts businesses and their profits, which feeds into share prices that then increase super fund returns.
Given what the Albanese Government hasn’t done for business and share prices, Don Farrell has no business leading our super funds like lambs to the slaughter trying to curry favour with Donald Trump, who could be a lame duck president after the mid-term elections.
While I applaud Farrell trying to help our graziers, he can’t do it by risking the country’s super members’ money.
The US President this year has trumped-up charges imposed, which said Australia failed to prohibit and enforce a ban on imports of goods made with forced labour, a position rejected as “unjustified” by Anthony Albanese, and he used this to increase Australia’s base tariff rate from 10 to 12.5% in July.
This is the kind of arm-twisting and standover tactics you would see in a Godfather film and there’s no justification to play ball with Trump.
The Australian reported that “it is not clear whether the proposal has been canvassed with the superannuation industry” but given the laws around the sole purpose test, which are policed by the Australian Taxation Office, I’d say Minister Farrell has not been given the nod for his super idea.
I have to say, and I can’t resist it: This is a ‘baa-d’ idea, Don!
Where do they find these guys, Don Farrell’s work life before getting involved in unions & politics “He worked for six years in his uncle’s kiosk at Cleland Wildlife Park and also worked as a mail sorter, council worker and waiter for periods.” Zero qualifications in trade. Get rid of this government.
Yet another blatant example of an ill conceived idea from a Minister in a Government with No Idea!
We need to de couple from US.
Jerrawee