The Turnbull government is looking at whether to stop rises in employee superannuation contributions to 12% in a bid to reduce the budget deficit.
The planned rise in compulsory super contributions was part of Labor’s 2010 mining tax, ditched by the Abbott government. While the level increased to 9.5%, further rises were postponed when the tax was repealed. A further increase to 10% is scheduled for 2021 rising to 12% in 2025.
The Australian reports that the Turnbull government is looking at whether to ditch the rises in compulsory retirement savings, preferring to offer income tax cuts instead and believing it will help the budget bottom line.
The three-year delay in the super rise by the Abbott government saved the budget $2.6 billion.
Treasurer Scott Morrison has cited modelling that shows the current 9.5% level will given someone on the median income of $52,000 annually 80% of the money they need in retirement.
But Industry Super Australia (ISA) claims the freeze would reduce a person’s retirement balance by 20% and reduce national super savings by more than $900 billion by 2055.
ISA says a typical female in industry super, earning 70% of average full-time wages, could lose $74,293 in retirement benefits in real terms over her entire working life, if the super contribution stayed at 9.5%.
The ISA modelling found the government would need to pay 6% more in age pension outlays to make up the shortfall.
David Whiteley, ISA Chief Executive said the proposal would reduce national savings and increase pension outlays.
“Speculation that such a measure would pay for income tax cuts is absurd. There would not be one dollar of savings in the budget forward estimates, and only a modest $500 million saving in 2021-22 which would deliver a tax cut of less than a dollar a week,” he said.
The government’s deliberations come as Turnbull and Morrison consider an increase in the GST as a way to also fund reductions in income tax.
A decision to scrap the increases would give Labor a key policy battleground going into the 2016 election.
The Australian has more here.
Business Insider Emails & Alerts
Site highlights each day to your inbox.