The superannuation guarantee rate, or how much employers are obliged to pay of their workers’ salaries into their super, is scheduled to rise from its current 9.5 per cent to 10 per cent next year, eventually reaching 12 per cent in 2025.
Liberal backbenchers have cast doubts on whether the increase should commence, as bodies including Treasury, the Grattan Institute and the RBA have warned higher super contributions could come at the cost of wage growth and jobs.
In a new letter to Treasurer Josh Frydenberg, the Australian Small Business and Family Enterprise Ombudsman Kate Carnell has proposed a two-year deferral on the legislated super guarantee increases.
But she has also urged for the 15 per cent tax on SG contributions to be slashed to 7.5 per cent during the two-year deferral, saying the combined measures will offset each other and workers will end up with a similar super balance as they would have under the increased contribution rate.
“We have to get the balance right by ensuring small businesses aren’t hit with rising costs and workers are no worse off,” Ms Carnell said.
“Many small businesses are struggling to stay afloat as a result of the COVID-induced recession and cannot afford to pay higher costs.”
Like others, the ombudsman fears the increased SG rate would place business owners under “even more financial strain, placing jobs and businesses at risk”, but she is in favour of boosting Australians’ retirement savings.
“It is equally important to safeguard the long-term financial future of Australians through superannuation,” Ms Carnell said.
“Our modelling shows our proposed tax cut would cost the government no more than $6 billion per year and would also support struggling small businesses and help the millions of Australians who used the early access to superannuation program to start restoring their long-term super balance.
“Ultimately, by implementing this proposal, the federal government would be supporting small businesses and all Australians who deserve a dignified retirement.”
The Coalition has seen backlash for leaning towards a freeze, with former prime minister Paul Keating recently blasting the Liberal Party as giving a “bitchy performance… trying to knock off compulsory super”. Former PM Malcolm Turnbull also opposed the freeze.
Industry bodies from the super sector have also lashed out at the idea, with Industry Super Australia chief executive Bernie Dean saying the rise will only grow in importance after the COVID crisis, particularly as members draw upon their super as part of the early access scheme.
Previously, the SG rate had been to reach 12 per cent by 2019, but the federal government changed the timeframe in 2014, deferring it to 2025/26.
Mr Dean told a parliamentary committee in May that the deferral had cost members, estimating around $100,000 lost from a nest egg for a 30-year-old on average wages.
Sarah Simpkins
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].
