As part of the government’s repeal of the Minerals Resource Rent Tax, the superannuation guarantee (SG) will remain at 9.5 per cent until 2021/2022.
The staged increase in the SG to 12 per cent will now take until 1 July 2025, almost a decade later than the original Labor legislation had envisaged.
Speaking to SMSF Adviser, Taxpayers Australia’s Reece Agland said these developments are a signal of the “reality” that superannuation will be facing further changes in the lead-up to the next election.
“Nothing was really said at the last election, but at the next election, it will be a battleground,” Mr Agland said.
“At this one they were a little too scared to touch super, so they said they wouldn’t touch it for a few years. But I think the next election is going to be a big issue.”
Mr Agland suggested the changes could involve taxing the superannuation of high net worth individuals, which is likely to affect the SMSF sector.
He has previously told SMSF Adviser it is becoming increasingly apparent that the tax concessions to the wealthy are “unsustainable” long term.
“A number of people, including Liberal heavyweight Malcolm Turnbull and Treasury Secretary Dr Martin Parkinson, have intimated that the excessively generous deductions in superannuation available to the wealthy are unsustainable and need to be considered in any genuine tax reform process,” Mr Agland said.
The Low Income Superannuation Contribution (LISC) will now be retained until 2017. However, Mr Agland said it should be a permanent fixture.
“Most people get a tax advantage over putting their money into super, but if you’re on the lowest level of income, you end up paying tax. It’s a bit of a ridiculous situation,” Mr Agland said.
Quoting Elaine
“Because they won’t. I know I wouldn’t put extra into super personally and I’m a SMSF administrator. Why? Because I would rather pay off my mortgage first. …”
Elaine is correct on both counts. When I was in Treasury a senior officer asked me what I thought of the Campbell Report and its discussions of superannuation tax concessions. To his surprise I replied “What concession? I am getting 7% tax-free in the superfund which I can’t touch but I am paying 8% non tax-deductible on my mortgage. I would prefer to be without the so-called concession and just have the money”. He was quite shocked. he had never thought of it that way – which tells you something about Treasury groupthink, still going strong after more than 30 years.
If super were abolished, a lot of money would be going elsewhere – and almost as tax-effectively.
[quote name=”Frans”]Why has nobody ever suggest that employees pay 3% super themselves? Why does it need to be a cost to the employer? Why don’t we ask people to help saving for their own retirement?[/quote]
Because they won’t. I know I wouldn’t put extra into super personally and I’m a SMSF administrator. Why? Because I would rather pay off my mortgage first. I think the main reasons most people wouldn’t is because they simply can’t afford it or would rather spend it on something else.
Technically, SG is the employee paying for it themselves anyway via reduced pay.
Why has nobody ever suggest that employees pay 3% super themselves? Why does it need to be a cost to the employer? Why don’t we ask people to help saving for their own retirement?