The Liberal-National coalition’s superannuation policy strikes a double blow to the retirement plans of low and middle-income earners including nurses and midwives.
Tony Abbott will delay for two years a Labor government measure to increase the Superannuation Guarantee (SG) from 9% to 12%.
He will also abolish the Low Income Superannuation Contribution (LISC) – in effect, raising taxes on the superannuation of people earning less than $37,000 per year.
Under current law, supported by Labor and the Greens, the SG rate will increase gradually, with initial increments of 0.25 percentage points on 1 July 2013 and on 1 July 2014. Further increments of 0.5 percentage points will apply annually up to 2019-20, when the SG rate will sit at 12%.
Labor says the increase from 9% to 12% means around an extra $127,000 in superannuation for today’s 30-year-old, earning average full time wages, who retires at 67.
If the Coalition wins the September 7 election, the increase to 9.25% for the 2013/2014 year will remain but there will be no further increase until 2016 at the earliest.
Earlier this year, the Coalition had pledged to increase the SG to 12% by 2019, in line with Labor policy. Their policy backflip left many superannuation experts wondering whether the Coalition could be trusted to eventually increase the guarantee to 12%.
Lynn Ralph, chairman of BT Funds Management, which manages more than $60 billion of superannuation money for clients, said the proposed two-year delay gave everyone in the industry “a nervous feeling that we will never get that 12% which, I thought, everyone in a bipartisan sense had agreed to.”
Chief executive officer of the Financial Services Council, John Brogden – a former Liberal leader in New South Wales – called Mr Abbott’s policy to “defer” 12%, “a bitter disappointment and a blow to the retirement savings of Australians.”
Labor’s LISC provides a tax rebate of up to $500 for people earning less than $37,000 per year, meaning they effectively pay no tax on their concessional super contributions.
“The LISC was brought in to correct an injustice for low-income earners, who used to pay as much if not more tax on their super contributions than on their wage income,” NSWNMA General Secretary Brett Holmes said. “It is highly unfair for Mr Abbott to target this group for budget savings.”
Trish Power, publisher of the consumer advice website SuperGuide, and author of several books on superannuation, called the Coalition’s decision to scrap the LISC “unwise and unfair”.
Will increase employer contributions to superannuation from 9% to 12% boosting the savings of around 8.4 million Australians.
Will keep the tax rebate for people earning less than $37,000 per year.
Will delay the increase to 12% in employer contributions for at least two years.
Will scrap the tax concession for low-income earners.
Support the increase in employer contributions and want to keep the tax concession for low-income earners.
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