Superannuation Guarantee (SG)

Superannuation guarantee to stay at 9.5% until July 2021

Government changes to legislation mean that the superannuation guarantee is likely to stay at 9.5% until 1 July 2021, and only reach 12% in July 2025.

The Government made a deal with the Palmer United Party to pass the repeal of the Minerals Resource Rent Tax. As part of the deal the LISC will be kept for a couple more years, but increases in the superannuation guarantee will be further slowed.

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Treasurer wants power to set superannuation guarantee rate

Treasurer  - Minerals Resource Rent Tax repeal superannuation (MRRT), superannuation guarantee, low income super contribution (LISC)The Government has introduced a bill to the Parliament which would give the Treasurer the power to set the superannuation guarantee rate by legislative instrument.

This is contained in the Minerals Resource Rent Tax Repeal and Other Measures Bill 2014, which is the third attempt to repeal the MRRT, change the rate of the super guarantee and repeal the Low Income Superannuation Contribution (LISC).

On Monday, first the Government moved to set aside the second MRRT repeal bill, after the Senate insisted on keeping the LISC and the currently scheduled increases in the super guarantee. Then at 12:36 pm the new bill was introduced to the Parliament, by just after 2:00 pm it had passed the House of Representatives.

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Easier employer contributions reporting under draft regulations

The Treasury department has released draft SuperStream regulations for consultation which would reduce the number of different super funds too which employers will need to report contributions data. These changes, if registered, would mean that from 1 July 2015 employers would only have to report contributions data to their default… Read More »Easier employer contributions reporting under draft regulations

Super guarantee of 17.5% needed for comfortable retirement: Deloitte

Deloitte says super guarantee of 17.5%-19.5% needed for a comfortable retirementMuch greater contributions, and broad reform of the superannuation system, is required to provide a comfortable retirement for most Australians according to a report recently released by Deloitte. The report, Adequacy and the Australian Superannuation System A Deloitte Point of View 2014, argues for a dramatic increase in the Superannuation Guarantee rate, and a combined effort between government and superannuation funds to increase both retirement adequacy and member engagement.

The report forecasts that even by 2034 at least 75% of retirees will still receive all or part of the age pension under current eligibility. Also, according to ABS statistics, the next 10 years will see an additional 1.7 million Australian retirees and pre-retirees.

Deloitte says that, even with the move to a superannuation guarantee rate of 12% this will not be enough to provide for a comfortable retirement from superannuation. The calculations show that men would have to contribute 5.5% each working year, with women requiring an additional 7.5%, on top of the 12% superannuation guarantee currently scheduled . This would take the super guarantee rate to between 17.5% and 19.5%. Given the opposition to raising the rate to 15%, as some have suggested, this seems unlikely.

Also, this lower rate of superannuation contributions is made worse by successive governments reducing the concessional contribution caps, which according to Deloitte has “meant it is even more difficult for those close to retirement to claw back reductions to their super balances” from the GFC.

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Paul Keating proposes Longevity Levy to supplement Super Guarantee

The former Prime Minister Paul Keating has made an argument for both increasing the Superannuation Guarantee and creating a safety net for after super runs out, noting “You can’t save under super for 30 years or 35 years and then live another 30 years off from it”.

In an interview with Lateline Paul Keating proposed a ‘longevity levy’ of 2-3% of wages to fund an insurance scheme for the provision of “income support, aged care and aged accommodation”. An alternative also proposed would involve changes to the preservation rules so money remained in super for longer, or as Mr Keating put it “to quarantine, say, 25 per cent of it where preservation rules would apply where they can’t touch it till 80”.

Recent comments in a speech by the treasurer Joe Hockey have also drew attention to the adequacy of superannuation: “despite spending billions of dollars in taxation benefits for superannuation, by 2050 the ratio of Australians receiving a full or part pension will still be around four out of five”.

However when the Superannuation Guarantee was introduced by the Keating government in 1992 it was at 3%, and only reached 9% in 2002/03:

Historical rates for Superannuation Guarantee

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