Government considering choice between super increase or pay rise

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A proposed move by the Morrison government to offer workers a choice between a pay rise or an increase in their compulsory rate of superannuation has been slammed by industry groups.

The Sydney Morning Herald reported on Wednesday that the opt-in superannuation increase was one of a raft of proposals being considered by the government in a bid to manoeuvre its way around the looming legislated rise in the superannuation guarantee.

The compulsory rate of superannuation is 9.5 per cent but is scheduled to rise to 12 per cent by 2025, something that the Morrison government committed to before the last election. The next legislated increase is scheduled to occur from July.

However, the government is considering a model that would see workers given the choice to put more of the money into super, or to take the increase as a pay rise. The plan could include letting the super guarantee rise to 10 per cent and making the final 2 per cent optional.

Both the Australian Institute of Superannuation Trustees (AIST) and Industry Super Australia (ISA) were heavily critical of the proposal, suggesting it would leave many Australian workers financially worse off.

AIST chief executive Eva Scheerlinck said the Morrison government seemed intent on undermining financial outcomes for Australians in retirement.

“Consumer research has repeatedly shown that Australians strongly support our compulsory super system rather than one which is opt in,” Ms Scheerlinck said.

“There is a broad understanding that unless we are compelled to save a portion of our wages, very few of us will have enough money for a financially secure retirement.”

Ms Scheerlinck explained that as the superannuation increases were incremental, it would result in very little extra cash if taken as a pay rise and the money would be eroded by additional income tax as well as losing out on the benefits of compounding interest on their savings.

“There are lots of ways to deal with low wage growth but forcing people to use their retirement savings to fund their own pay rise shouldn’t be one of them,” Ms Scheerlinck said.

“This is especially so for older workers on low incomes who can use super to top up the full age pension in retirement.

“The median super balances for 55-to-64 year olds are $183,000 for men and $118,600 for women, based on 2018 (latest available) Bureau of Statistics data. A balance of this size will add more than $100 to the $470 weekly income of a single pensioner.

“For older workers who are some years off retiring having an extra 2.5 per cent of their wages go into super will make it just that much easier to meet daily expenses and enjoy a quality retirement.”

ISA said the proposals would rip billions of dollars from the pockets of workers and deliver them to the government in the form of higher taxes.

According to ISA, up to two-thirds of a pay increase could be lost in higher taxes and reductions and other government support payments.

ISA chief executive Matthew Linden said the plan was underhanded and would force workers to pay for their own wage increase.

“Removing the guarantee in the super guarantee to make it ‘optional’ is a recipe for higher taxes, lower lifetime incomes, and a red tape nightmare for business,” Mr Linden said.

“The government should follow through in the legislated increase to 12 per cent and not be exploring underhanded ways to renege on it.

“This isn’t choice – it’s a sneaky tax grab that will leave people worse off and rip up one of the system’s founding principles.”

Would you prefer a choice between a pay rise or a super increase? Which one would you choose?

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Written by Ben


Total Comments: 11
  1. 0

    Compulsory super is essential. If many choose to opt out, the result is likely to be poverty in old age. Plus already the Government is saying, don’t depend on the Age Pension being available. What is a person going to live in then? I speak from experience. The age for the Age Pension is rising, and the DSP is now almost impossible to get. To my mind, having little or no super is misguided.

    • 2

      No, rtrish, the government has never said that; superannuation companies have said that and the government has always maintained that the age pension will always be available.

  2. 1

    “Would you prefer a choice between a pay rise or a super increase? Which one would you choose?” I would opt for the super increase over a pay rise. It’s only when one retires that one realises the benefit. Those opting for pay rise will spend it and when they are due to retire they will cry poor. Over past few years superannuation return have been around 7% pa, far greater than the half a percent paid by bank’s saving accounts.

  3. 0

    What would I choose? If I was aged less than 40 years I would opt to take the cash ie wage increase. At this stage of my life I would be married, looking to purchase a home and raise, educate and clothe my children. That is when I will have the greater need for cash. If on the other hand I am aged more than 40 years, I would opt for higher superannuation contribution. I would be looking to supplement this with voluntary contributions along the way. At 40 years of age I expect that he retirement age will be 70 years of age – so I still have 30 years of compounding.
    When making comparisons, I note that fees charged by the superannuation funds have been ignored.

  4. 0

    more super, my wife works ,i,m on a part pension every extra dollar she earns she pays 35% extra tax and i lose 25 cents per dollar from my part pension.Thats 60 %,the super is taxed at 15%,not a hard decision.Liberals just to screw us a bit more.

    • 0

      It doesn’t matter which government is in charge, State or Federal, Labor or LNP. They all intend to scew taxpayers with tax. How do you think MPs and Senators get to earn over $200,000 per year?…Out of taxpayer’s earnings, your hip pocket.

  5. 0

    What about our pension rises? If you don’t work, then you’re stuffed either way.

  6. 1

    This is a ridiculous option. Most in their 20s & 30s are likely to opt for cash NOW. What then will happen when they reach 40 & 50 and suddenly realise they won’t have any super? Are those of us that decided to opt for super then going to be expected to subsidise them in retirement? This will mean yet again, people who look after themselves will be made to pay for those who don’t!

    Super MUST be compulsory AND the already legislated increase to 12% over time MUST go ahead. We have waited long enough for the increase.

  7. 0

    What a lot of crap!!
    This happen last year.
    The result was no wages went up!!
    I remember around mid February last year when Morrison did a quick doorstop on 7 news when he was working on a plan so that the aged pensioners would get a lot more money and bigger rises twice a year!!
    Then came Covid 19 and Morrison closed down parliament but he didn’t closed the government!!
    Since then we have been told that people owning $180,000 pa will get a tax cut of $70:00 per week $ 140:00 per month that these people will have in they pocket for life!!
    We also know that Morrison is going to spend well over 1.25 Billion on deference!!
    But pensioners have only got two one off Covid related “bonuses!!”
    The second comes during this March.
    This is when pensioners should have a pension rise!!
    I see this as nothing but a cynical token!!
    It looks like Morrison has no regard to pensioners!!
    Put things this way.
    If you earn over $ 1800:00 you are treated a lot better than pensioners as these people have got this more money in they pocket for life!!
    Meanwhile with the extra $ 240:00 pensioners have to spread it out as far as thy can!!
    Where’s the equity for pensioners compared to those earning around $ 1 80:00 pa?
    What do pensioners have to do to get something better!!??
    Think about it!!!

  8. 0

    However there is an argument that the amount of tax the government loses to the 15% tax concession that super attracts means that it would be cheaper to not got to 12% and give everyone a universal pension when they retire. The wealthy certainly benefit the most from super contributions and the young gain the lest. A very unfair system.



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