The government’s proposal to allow workers earning less than $50,000 a year to opt out of compulsory super has been called “nothing less than a tax grab” by one industry expert and “farcical” by another.
The idea, floated by Liberal senator Andrew Bragg and now being considered as part of the government’s retirement income review, would see lower-income workers able to opt out of compulsory super and have that money diverted into wages instead.
However, as Industry Super Australia (ISA) notes, what could be seen as a pay rise for lower-income workers would also put many of them in a higher tax bracket. And, wages are taxed at a higher rate than super contributions – almost double in most cases.
“The numbers make it clear the real winner is the government, with workers left paying higher taxes to line government coffers,” says ISA.
To highlight its point, ISA released analysis that shows “the extent of the super tax grab” in Tasmania.
“Tasmanian workers will be slugged more than 100 million more in tax every year, only to end up destitute in retirement,” said ISA chief executive Bernie Dean, who called the “dangerous proposal” a “blatant tax grab by the government to prop up its own budget bottom line, at the expense of hardworking Tasmanians’ retirement savings”.
And it seems that Australian workers agree with Mr Dean, with a new Essential Research survey commissioned by the Australian Institute of Superannuation Trustees delivering the government a clear message – leave our super alone.
The survey revealed that just one quarter would rather have the money now than in their super, and only one in 10 disagree with the government policy of lifting compulsory employer super payments to 12 per cent of wages by 2025.
“There is no justification for excluding any worker from benefiting from 12 per cent super, but it is particularly important for people on low incomes, those working part-time or those who have taken time out of paid work as carers,” said Australian Institute of Superannuation Trustees CEO Eva Scheerlinck, who added that people were unconvinced by claims that freezing compulsory super would deliver them a pay rise.
“It is farcical to assume, as some MPs have suggested, that workers will receive a pay rise if the SG is frozen,” she said.
Wealth on Track principal Steve Greatrex agrees, saying that “the truth is a lot of employers won’t pay them more”, but “at least if it’s in the superannuation system people have rights”.
Would you have benefited from having an extra three per cent put into compulsory super?
If you enjoy our content, don’t keep it to yourself. Share our free eNews with your friends and encourage them to sign up.
Related articles:
Basic flaw in new super tool
ATO publishes lost super hotspots
Retirees flying solo with finances
