The tax on super contributions for low-income workers is deeply unfair and inappropriate, according to Australian Council of Trade Unions (ACTU) assistant secretary Tim Lyons.
In a wide-ranging speech at an Australian Institute of Superannuation Trustees lunch in Sydney, Lyons also called for super funds to invest more in local infrastructure and dismissed criticism of an increase in the superannuation guarantee (SG) to 12 per cent.
“It is ridiculous that low income workers pay more tax on their super than they would pay on earned income, and we are pleased that the Government has announced a proposal for a rebate for those earning less than $37,000 per year,” Lyons said.
The current superannuation guarantee of 9 per cent would not be enough for many workers, particularly casual, part-time and female employees, he said. A shift to 12 per cent would help bridge that gap, but in the long term a move to 15 per cent would be beneficial, he said.
The super system was never intended to be a replacement for the pension system but rather the two were designed to be complementary, he said.
Lyons described the gradual increase in the superannuation guarantee in 0.25 per cent increments as a “telegraph punch” and said it would be difficult for employers to argue that an increase that gradual would be difficult to incorporate.
Jeremy Cooper’s MySuper recommendation is a vindication of the industry super model in terms of the investment portfolio, the risk and the simplicity – but it also posed a threat to that model, he said.
Australian super funds also need to find better ways to invest Australian workers’ capital in local infrastructure products without compromising investment returns, he said.
“It is unacceptable that super funds in Australia can routinely find it easier to invest in infrastructure projects overseas than in Australia,” he said.
“The Government needs to take better account of funds management decisions and design a tax and procurement framework that facilitates investment by funds in an Australian context. Too many Australian infrastructure projects involve high fees and suit investment banks and construction consortiums but not super funds,” he said.
Lyons also called on industry super funds to continue to put downward pressure on the fees that members pay and to be more engaged in environmental, social and governance issues.
