The real problem with small superannuation accounts is the $450 monthly threshold to receive Superannuation Guarantee, which should be “dramatically” raised according to the accounting body Chartered Accountants Australia & New Zealand (CAANZ).
The Government announced in the 2018 Budget a number of measures aimed at reducing and limiting the erosion of low super balances, including caps on fees and opt-in insurance, which CAANZ said was commendable.
However these changes fail to address what CAANZ says is the main issue – the $450 threshold for SG payments.
Tony Negline, Superannuation Leader with CAANZ, says the threshold – which had been in place, at its current level, since 1992 – needs to be “dramatically revised upwards”. He said most low income earners will likely receive the full age pension, and will pay more tax on super fund investment returns than on their wages.
“Why do we penalise them in this way?” he asks.
“We encourage all governments to solve this problem at its source rather than try to solve it by increasing regulatory complexity.”
Calling for the $450 SG threshold to be raised runs counter to the recommendations of the superannuation industry, among others. Industry Super Australia was critical of the Budget for raising over $1.6 billion from changes to superannuation but not abolishing the SG threshold. ASFA has said the threshold creates an ‘underclass’ of workers, while ASFA has said it is a barrier preventing women from achieving a dignified retirement.
Removing the $450 SG threshold was also a recommendation of the Senate inquiry into economic security for women in retirement.