ACOSS has recommended freezing the Super Guarantee rate at 9.5%, while winding back superannuation tax concessions to fund health and aged care services.
The Australian Council of Social Service (ACOSS), in a submission to the Review of Retirement Income, and drawing on the work by the Grattan Institute, recommends the Super Guarantee rate remain at its current level of 9.5%
“For people with low and modest incomes, the cost of increasing the super guarantee (i.e. reduced take home pay) during their working lives would likely exceed any benefit derived in retirement, noting that the age pension will continue to be the primary source of income for many of these households.”
ACOSS says increases in the Super Guarantee rate “should only proceed if more compulsory saving substantially benefits people on low and modest incomes”. And it should only go above 10% if there is tax reform “so that people on low wages receive at least the same tax support per dollar contributed as those with higher incomes”, the increase is “justified”, and the super system remains “universal”.
This last point means, according to ACOSS, that “the same compulsory saving requirements and conditions applying as far as practicable to all employees (so that people on low incomes are not left behind in saving for a decent retirement)”.
As part of this, ACOSS also proposes a “revenue-neutral reform of tax concessions that would equalise tax breaks for every dollar contributed on behalf of people at different income levels”.
“The flat 15% tax on employer superannuation contributions means that a cleaner earning $20,000 (who normally does not pay tax on earnings) receives no taxation support for compulsory employer contributions, yet a fund manager on$200,000 receives a tax break of 32 cents per dollar contributed.”
Under the proposal, all super contributions would receive a “uniform” 20% refundable tax credit up to a “modest” annual cap – with ACOSS suggesting $15,000 in contributions.
ACOSS says this should apply to all contributions, “regardless of source” – it is unclear if this extends to non-concessional contributions or just includes personal and employer concessional contributions.
“In addition, the first $500 of contributions should attract a dollar for dollar tax credit to boost the retirement savings of people with very low earnings, most of whom are women.”
But ACOSS also recommends winding back some tax concessions to raise around $5 billion a year to put into health and aged care. This money would be raised, in part, by taxing super fund income in the pension phase (currently 0%) at the same rate as income in the accumulation phase, 15%. But “superannuation benefits would remain tax-free”.
ACOSS CEO Dr Cassandra Goldie: “While retirement incomes have improved since the rise in the age pension, many older people under the pension age are finding themselves out of paid work, often due to age discrimination. The fastest growing group of people on Newstart are those aged over 55, particularly women, and they are struggling to get by the on the paltry rate of $40 a day, which must be urgently increased.”
The Retirement Income Review won’t be making recommendations, instead it is meant to provide a ‘fact base’.