A- A A+

Delay in super levy unwelcome politics

03 September 2014  |  Super

unwelcomeThe Government has reached agreement with the Palmer United Party in the Senate, will put the current superannuation guarantee (SG) levy at 9.5% on hold until to 30 June 2021, when it will increase by 0.5 percentage points until it reaches 12% in 2025. It reverses the Government’s announcement, made in the May Budget, to freeze the SG at 9.5% until 30 June 2018, and on 1 July 2018 to resume increasing it by 0.5% increments until reaching 12% in 2022-23.

Paul Keating, one of the architects of the original legislation, has been strongly critical. It is part of the increasing politicisation of superannuation.

The big problem is that 9.5% will not really be enough for most people's retirement, especially older workers. It strongly suggests that salary sacrifice is a good idea. After all, this is only the withdrawal of the mandated levy. Superannuants can still put in more if they wish.

Fund managers are complaining, although they of course do have a vested interest. The AFR reports:


"The chief investment officer of one of Australia’s largest and fastest growing superannuation funds, HOSTPLUS, has added his voice to the chorus of disappointment at this week’s Senate deal to push out the hike in compulsory super contributions from 9 per cent to 12 per cent till 2025.

“It is a very disappointing decision for all Australians that will disproprotionately disadvantage lower income earners,” HOSTPLUS chief investment officer Sam Sicilia said.

“Providing citizens with a dignified retirement is the primary objective of the superannuation system but the current compulsory savings rate will leave most people with a balance at the end of their working life that is grossly inadequate.”

Modelling done by Industry Super Australia shows that delaying the introduction of 12 per cent compulsory contributions from 2019 out to 2025 means somebody who is 25 years old today is, on average, set to be $100,000 worse off at the time they retire."


Some of those vested interests are very large indeed. Many of our super funds are big players by world standards:

Super delay leaves most savers with ‘grossly inadequate’ balance


Andrea Slattery, head of SPAA argues that the decision highlights an urgent need to have an informed debate about measuring the long-term budget cost of superannuation and what is considered an adequate income for retirement, especially when it’s considered that people are now living, on average, into their mid-80s.
She says it is crucial that major superannuation policy decisions be removed from the annual budget cycle and instead be subjected to a five-year review as part of the intergenerational report. "The Government’s decision to make this short-term fiscal decision came at the expense of the long-term retirement goals of the Australian people.
“By linking the abolition of the mining tax with the decision to freeze the SG for seven years, the Government is again demonstrating that dipping into the superannuation ‘piggy bank’ is always an option when difficult fiscal decisions have to be made. This decision only works to undermine the public’s confidence in the superannuation system that’s the key plank to their long-term retirement planning,” she says.


Similar articles from Super

The super fee rort

 | 9/14/2014

RortBecause super fund managers get paid a percentage rather than a flat fee, their income is soaring to extraordinary levels.

SMSFs have their own governance problems

 | 9/8/2014

GovernanceThe governance issues at retail and industry funds are signficant and are being widely debated. But DIY funds have their own, often unrecognised, governance issues.

The in-house assets trap

 | 8/27/2014

jailTrustees of SMSFs need to be careful of the in house assets rules. Contraventions of these rules account for more than a quarter of all breaches.

Small super tax is big politics

 | 8/26/2014

taxThe tax breaks on super are becoming a major political issue. But the real winners are those in the financial services industry.

ATO reviews SMSF Tax concessions data

 | 8/25/2014

cheatMore than half of self managed super funds pay no tax, according to ATO data. In particular, dividend imputation gives them a tax holiday. The average fund now has $920K.



Subscribe to the Personal Super Investor weekly email to keep abreast of developments in SMSF law and investment markets. SMSF investors looking to improve investment returns from shares, property, cash or other specialised investments, will find the PSI weekly newsletter an invaluable resource.

Subscribe now »


The contents of this website are of a general nature only and have not been prepared to take into account any particular investor's objectives, financial situation or particular needs. Our content is not intended to be advice and must not be relied upon as such. You should seek independent advice tailored to your specific circumstances prior to making any decisions. Personal Super Investor does not provide financial product advice or recommend any financial products: Where this website or it derived newsletter/electronic publication refers to a particular financial product, whether it be within our editorial or a 3rd party advertising, advertising promotion or advertorial, then you should obtain a Product Disclosure Statement (PDS) relating to that product and consider the PDS before making any decision about whether to acquire the product. We also recommend that you should seek professional advice from a financial adviser before making any decision to purchase any financial product referred to on this website. We do not make any representation or warranty that any material on the Personal Super Investor website will be reliable, accurate or complete, nor do we accept any responsibility arising in any way from errors or omissions of our content or any content provided by any advertiser appearing the Personal Super Investor website. We will not be liable for loss resulting from any action or decision by you in reliance on the Material (whether editorial or advertising) on the Personal Super Investor website, nor any interruption, delay in operation or transmission, virus, communications failure, Internet access difficulties, or malfunction in your equipment or software. By using the site you acknowledge that we are not responsible for, and accept no liability in relation to any content contained on the site that you may use, including any other users’ use of the Personal Super Investor website in any circumstance. You use the Personal Super Investor website at your sole risk.