Chloe KennedyTreasury's Super Performance Test Review: 3 Proposed Changes That Could Reshape Your Retirement Savings
Australia's federal government has opened a public consultation to reform the annual superannuation performance test — a process that affects millions of fund members across the country. The consultation paper, released by Treasury in May 2026, proposes three significant changes to the way underperforming super funds are identified and held to account. If the reforms proceed, they could directly influence where your retirement savings are invested and how your fund reports its performance to you.
What Is the Annual Superannuation Performance Test?
Introduced in 2021 under the Your Future, Your Super package, the annual superannuation performance test is run by the Australian Prudential Regulation Authority (APRA). It compares each MySuper and trustee-directed product's ten-year net investment returns against a set of benchmark measures. Funds that fall short of those benchmarks for two consecutive years must notify members and are barred from accepting new members until performance improves.
The test was designed to protect Australians from sitting in chronically underperforming funds without realising it. Before the test was introduced, the Productivity Commission found that a third of workers were in persistently poor-performing funds, costing them tens of thousands of dollars over a lifetime of work. According to the Australian Prudential Regulation Authority (APRA), the test has already prompted several funds to merge, consolidate or exit the market since its introduction.
What Is Treasury Proposing to Change?
The May 2026 consultation paper from Treasury targets three specific weaknesses in the current test design. Understanding each one helps you assess whether your fund's current approach might shift in the years ahead.
1. Adjusting benchmarks for alternative assets. The existing test relies on public market benchmarks — share indices, bond indices, and similar measures — that do not adequately reflect the risk and return profile of private equity, infrastructure, or unlisted property. Treasury has identified evidence that the current design may be discouraging funds from investing in these asset classes even when they would otherwise serve members' best financial interests. The proposed reform would allow the test to use asset-class-specific benchmarks that better match the actual risk taken by a fund investing in alternatives.
2. Introducing risk-adjusted return assessments. A fund that takes on significantly more volatility to generate its returns is not comparable to one that achieves similar returns with less risk. The consultation proposes incorporating a risk-adjustment component into the test so that raw returns are not the only measure of quality. This would reward funds for generating consistent, sustainable performance rather than for concentrating in high-risk positions that happen to pay off in a given decade.
3. Extending the test to externally directed accumulation products. The current test applies to default (MySuper) products and some choice products, but certain externally directed accumulation offerings — where members direct their own investments — fall outside its scope. Treasury is proposing to bring these products into the regime so that a greater share of the $4 trillion Australian superannuation system is subject to consistent performance scrutiny.
Submissions are open until 19 June 2026. You can access the full consultation paper at treasury.gov.au.
Why Does the Performance Test Matter for Your Balance?
The performance test matters because most Australians interact with their superannuation infrequently and trust that their fund is working in their interests. The test is one of the few mechanisms that forces a fund to be accountable to its members — and to the regulator — when it falls short.
However, the test is only as strong as its design. If benchmarks do not reflect what a fund is actually investing in, a genuinely underperforming fund can pass the test simply by holding mainstream assets that track the benchmark, even while better-managed funds — which invest in infrastructure or private credit — appear to underperform on paper. This is what experts call "benchmark hugging": managing a portfolio not to maximise returns but to avoid failing a specific measurement.
For members invested in a fund that holds significant unlisted assets, the proposed changes could make performance comparisons more accurate, and may result in your fund's ranking shifting — either up or down — once the revised benchmarks are applied. That shift has real-money consequences. A 0.5 per cent improvement in annual net returns, compounded over 30 years on a $150,000 balance, can translate to more than $70,000 in additional retirement savings.
3 Questions to Ask a Wealth Advisor Now
The consultation process is an opportunity to understand your own exposure to the changes. If you have a significant superannuation balance or are within ten years of retirement, a wealth management advisor can help you work through the following questions.
Does your fund hold significant alternative assets? If your super is invested heavily in infrastructure, private equity, or unlisted property, the new benchmarks could change how your fund is assessed, for better or worse. Knowing this now means you can have an informed conversation with your fund before any changes take effect.
Is your fund currently passing the performance test? APRA publishes the results of the performance test annually. If your fund is close to the underperformance threshold, you should understand what that means for your membership and whether action is warranted.
Are you in the right product for your stage of life? The proposed extension of the test to externally directed products is a signal that regulators are paying closer attention to the entire landscape of super products, not just defaults. A financial advisor can review your current product and contribution strategy in light of your retirement timeline.
According to recent ExpertZoom analysis on superannuation changes in April 2026, Australians who reviewed their super arrangements after a major regulatory change were significantly more likely to be satisfied with their retirement outcomes than those who waited for a fund to notify them.
What Happens Next?
Treasury will review all submissions following the June 19 closing date and is expected to release revised legislation or guidance later in 2026. The reforms, if passed, would likely take effect from the 2027 performance test cycle. That gives members roughly 12 months to understand their current position before any new assessment is made.
If you are uncertain whether the proposed changes affect your fund, the best starting point is a one-on-one conversation with a qualified wealth management advisor. ExpertZoom connects Australians with financial professionals who specialise in superannuation review and retirement planning. A brief consultation now can help you understand what the reform means for your specific fund and make any adjustments well ahead of the 2027 test.
This article provides general information only and does not constitute financial advice. Please consult a qualified financial professional before making decisions about your superannuation.
