The Financial Services Council says the Government should implement its original commitment to increasing the Superannuation Guarantee rate to 12% by 1 July 2021.
The SG rate was set to increase to 12% from 1 July 2019. Following the 2013 Federal election the incoming Liberal Government said it would delay this by two years, to 2021. However as the Minerals Resource Rent Tax worked its way through the Parliament this schedule was further delayed. The SG rate is currently legislated to reach 12% from 1 July 2025.
The FSC, in its 2017/18 pre-Budget submission, calls on the Government to return to the original two year delay, “in order to minimise the negative impacts of the delay on employee’s retirement savings and the economy”.
“The increase will generate long-term economic benefits and continue to address the national shortfall in retirement savings that is causing Budget challenges for the Government.”
FSC points to research showing that Australia has a considerable retirement ‘savings gap’, which is exacerbated by a slower increase in the SG rate.
“Significantly, the proposed delay to the phasing in of the Super Guarantee to 12 per cent will result in a cumulative impact of around $40 billion less in super savings in the system over the next seven years.”
“There is no evidence to support the proposition that the increase to the SGC [Superannuation Guarantee Charge] is a tax on business or negative for business generally. The implementation schedule was specifically designed to allow employers to take the increased SGC contributions into account when negotiating future wage settlements, ensuring that the incidence will largely fall on individuals.”
“There is also a significant positive impact on the economy of increasing the pool of national savings. Superannuation stabilised the Australian economy during the financial crisis by providing a domestic pool of funds on which Australian businesses were able to draw.”