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(June-2002) Super heads for political minefield
The Government looks set to encounter plenty of opposition when it attempts to get some of its Budget proposals passed through the Senate this month.
The Democrats have vowed to block its plans to introduce choice-of-fund and to cut the super surcharge to 10.5 per cent over the next three years. Labor has also come out strongly against the surcharge cut and says it will not support choice-of-fund until it has had a chance to study details of this legislation.
In addition, Labor plans to oppose proposals to allow the splitting of superannuation contributions and to close the Public Sector Superannuation Scheme to new members from July 1, 2003.
Senator Nick Sherry, Shadow Minister for Retirement Incomes and Savings, says the Government’s plans to cut the surcharge will only benefit the top three per cent of working Australians. Instead, Labor proposes an across the board cut of the 15 per cent tax on superannuation contributions to 13 per cent or alternatively, a cut in this tax to 11.5 per cent for workers aged 40 and over.
The Democrats’ former spokesperson on super, Senator Lyn Allison says her party will block the planned surcharge rate cut “for revenue and equity reasons”, noting that high-income earners already enjoy considerable tax concessions. Instead, the Democrats would like to see changes introduced that benefit low-income earners.
And, in what feels like a case of deja vu, the Democrats will once again oppose the proposed choice-of-fund legislation.
“We’ve had no progress from the Government on our bottom line, that is, that discrimination against same sex couples be resolved by legislation. [Without this] we are not interested in supporting choice of fund,” says Allison.
Nonetheless, the Government appears confident about getting choice of fund passed, announcing that it will commit $28.7 million over four years from the Budget to the Australian Taxation Office for an education campaign.
The Budget held few surprises for the super industry, as almost all of its super related measures were part of the Government’s pre-election promises for ‘A Better Superannuation System’, although in some cases, further clarification has been provided on these.
These measures drew mixed reactions from the superannuation industry, with several experts noting they might increase the administrative costs and complexity of super, and they do little to improve the adequacy of super savings.
Association of Superannuation Funds of Australia (ASFA) CEO Philippa Smith says the Budget advances superannuation policy by small steps, but fails to take the large strides needed to cope with the demands of a rapidly ageing population.
Australian Institute of Superannuation Trustees (AIST) president Susan Ryan adds: “Overall, the changes are directed at better off families. There is little to address the well-documented shortfall in super for the low paid, and those, mainly women, who spend years out of the paid workforce.”
She notes that some measures like the introduction of child super accounts, allowing the baby bonus to go into super, allowing splitting for spouse accounts and personal contributions by the over 70s are “minor changes unlikely to be taken up by many people”.
The introduction of forced quarterly super guarantee (SG) payments has been widely welcomed because it is expected to lower employees’ risk of losing their super entitlements if their employer goes bust. But some players have warned that the Budget’s proposal to lift the minimum wage eligible for super entitlements from $450 a month to $1,350 a quarter will set back casual, part-time and seasonal workers’ retirement savings.
Sherry cites the example of a person who earns $1,000 in a fortnight with one employer, but then goes to work for someone else for the same period at the same rate. This person would normally get $90 paid into a super fund on their behalf for each job, but under the Government’s proposed change, they miss out on super altogether.
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