Industry Super Australia (ISA) today expressed concern regarding the linking of the repeal of the Low Income Super Contribution (LISC) and the delay in increasing the Super Guarantee to 12%, as part of the Government’s repeal of the Mineral Resources Rent Tax.
We are at a point in time when Australians are recognising that we must do everything to build retirement savings in the super system and reduce the pressure on future funding of the age pension. In particular, with ISA’s commitment to ensuring that our system of superannuation tax must be sustainable and fair, the LISC addresses a fundamental inequity in our system without which low income earners actually pay more tax on their super contributions than on their take home pay.
Abolishing the Low Income Super Contribution will mean one in three working Australians will lose access to any tax break on their mandatory contributions.
ISA analysis indicates that its removal could mean as much as $30,000 less in retirement for a person on a low income.
Between 1.5 million and 2 million industry super fund members benefit from the LISC. Around two thirds of these are women. Given that the average woman currently retires with around 43% less in retirement savings than men, it is critical that the Government finds a way for the LISC to be retained.
ISA notes the cost of the LISC has been more than fully funded from a redistribution of tax concessions within the super system itself in recent years, in line with the broad recommendations of the Henry Review. Nevertheless, ISA will engage with industry and with the Government to identify other cost savings that might enable this critical rebate to be retained.
The Government is seeking to balance short-term budget pressures against the need to build more adequate levels of retirement savings through the SG increases. The proposed delay to the phasing in of the Super Guarantee to 12% will result in a cumulative impact of around $40 billion less in super savings in the system over the next seven years. This will be felt by individual members and the broader economy that will be looking to super to help underpin investment to sustain the next wave of growth. To ensure long term sustainability of our retirement incomes system and economic growth it is vital there is no further delay in increasing the SG.