Super rules are being rigged for Labor's favourites

Andrew Bragg

May 8, 2026

First published in the Australian Financial Review.

There are two things very wrong with Labor's proposed changes to the super performance test.

It is another example of their distorted agenda to promote institutional landlords and create an arbitrage benefit for super funds.

But this approach also allows Canberra to direct investment into things which clearly do not stack up as the existing benchmarks already allow for any type of investment.

Firstly, the super performance test was introduced by the Coalition at the recommendation of the Productivity Commission. It ranks funds based on the yearly and longer-term returns on their investment, net of fees, against a benchmark.

This was done to weed out underperforming funds and cut high fees for members.

Instead, Labor has now proposed to place housing and other selected assets into an "emerging assets" pool where super funds, which already receive billions in taxpayer funding, can be exempt from the test and can continue to underperform.

If ever there was an example of Canberra picking winners and creating white elephants, this is it.

It is insane to change the rules when the funds are already heavily investing in these "emerging assets". Hostplus invests in venture capital, Aware invests in housing. Cbus invests in renewables. These are things the funds are already doing.

But it's not about facts. It's about locking in Canberra's right to direct investment. It's winding back the clock to a pre-Campbell inquiry mindset where the government knows best.

Such an approach will also reduce transparency and checks and balances around how Australians' retirement savings are invested, exposing them to greater risk.

But this was all part of the plan to kick mum and dad investors out of housing and replace them with institutional landlords.

Labor has very close ties with union-backed super investment in housing, and it is no wonder why it continues to favour them.

AustralianSuper, with HESTA, participates in Labor's $11.4 billion Housing Australia Future Fund (HAFF) through a jointly owned entity called Assemble.

Assemble received more than $2 billion, or more than 20 per cent of the HAFF Round 1 funding.

The ACTU owns shares in AustralianSuper and appoints directors to its boards. The Association of Superannuation Funds has admitted that they believe Australians would prefer to live in houses owned by institutional investors.

This is Labor's mindset: get rid of negative gearing for families and give tax breaks and regulatory benefits to the likes of Cbus, AustralianSuper and HESTA.

It is nonsensical. Labor thinks one type of investment is good, but other types of investment are bad.

No wonder the housing supply numbers are in the toilet. The RBA projects dwelling investment going negative by December 2027 despite Canberra's $80 billion investment.

Labor has already passed tax changes to support build to rent for foreign investors.

They prioritised payments through the HAFF to super landlords.

They asked ASIC to rig Regulatory Guide 97 to cover up stamp duty charges for institutions.

Chalmers even filed a false public interest immunity claim to protect lobbying from Cbus on stamp duty costs.

Just when you think they've done all they can to create a housing nirvana for big super, they pull a tax rabbit out of the hat.

The touted changes in the upcoming budget to the CGT discount will aim to hike taxes for Australian investors in housing, as well as hiking taxes for investment types in other asset classes.

But they will have a giant carve-out for super funds. Their existing CGT discount will not be changed, it seems.

The individual investor will get a tax increase, the super fund will get a bigger tax advantage and a performance test exemption. What a country!

Secondly, this approach is only needed if you want super funds to do things that just don't stack up.

The existing benchmarks already allow for any type of investment. There are more than 20 benchmarks across different asset classes.

The current performance test is broad ranging. APRA notes that it enables users to compare product performance across all key super product types.

The funds work with APRA on their benchmarks. They set the benchmark to suit their asset allocation.

The performance test comprises two components: an investment performance component that measures the implementation of an investment product's strategy by comparing the returns of the product to a benchmark derived from the product's Strategic Asset Allocations; and a fee and costs component that measures how the administration fees and costs of a product compare to peer products through a comparison fee benchmark.

If a fund fails to meet its benchmark, it must notify all members of its failure. A repeat means no more members. The Treasury consultation paper on this issue, released on Friday, says that since the operation of the test, "APRA data indicates that 108 of the 123 products that failed the test have exited the industry."

The rules don't need to be rigged. They are only being rigged to give Canberra the right to pick winners. Just like the Future Made in Australia boondoggle.

Given Labor's other existing and touted changes, all this punishes enterprise and innovation.

Ultimately, it delivers a structural tax and regulatory arbitrage that systematically favours superannuation funds over individual investors.

And none of this will build the houses Australians desperately need.