The Morrison government has flagged the prospect of ‘opt-in super’ when the whole point of superannuation is that it is compulsory.
The Morrison government continues to bob and weave as it tries to renege on its election promise to increase the super guarantee to 12 per cent.
The super guarantee is scheduled to rise from 9.5 per cent to 10 per cent this year, and then to 12 per cent by 2025. These increases are already legislated and in the lead-up to the 2019 federal election the Liberal government promised to implement them.
Last year the government indicated that the increases were unaffordable and would hurt wages and jobs. A prominent group of Liberal MPs called for the cancellation of the increases completely.
Now the government is pro-posing that the additions above 10 per cent be optional. Under this “option”, workers could choose to take additional payments as extra wages rather than as a superannuation contribution.
Critics from the superannuation sector, the union movement, economic commentators – and two former prime ministers – have savaged the government’s proposals.
Paul Keating, the architect of industry super, said the opt-in, opt-out approach would require the government to “legislate to compel employers to pay the 2.5 per cent as wages, because the enterprise bargaining system cannot pay them, as the last eight years (of little wages growth) have demonstrated”, the Sydney Morning Herald reported.
Industry Super Australia Deputy Chief Executive, Matthew Linden, said the federal government should follow through on the legislated rise rather than “exploring underhanded ways to renege on it”.
“Removing the guarantee in the super guarantee to make it ‘optional’ is a recipe for higher taxes, lower lifetime incomes, and a red-tape nightmare for business,” Mr Linden said. “This isn’t choice – it’s a sneaky tax grab that will leave people worse off and rip up one of the system’s founding principles.”
The government is being disingenuous
In The Guardian, economics commentator Greg Jericho brand-ed the government’s proposals as “disingenuous”.
“If this government truly wanted to increase wages it would not institute a policy to reduce public servants’ wage growth. It would also not seek to reduce the bargaining power of workers as it has continually sought to do,” he said.
“If you want to fix wages growth, fix wages growth. And if you want to improve retirement incomes, don’t instead seek to destroy superannuation because you hate industry funds.”
Former Prime Minister Kevin Rudd was also highly critical of the proposal, describing it as a Liberal Party “ideological obsession”.
“(Superannuation) delivers a private benefit for individuals, who are helped to invest for decent retirement, and a public benefit by reducing pressure on the aged pension, creating a strategic pool of investment funds and stabilising the economy against international shocks,” he said.
ACTU Secretary, Sally McManus, said any delay to the compulsory superannuation guarantee rise would not lead to higher wages.
“At a time of great uncertainty and after hundreds of thousands of people emptied their super accounts under the early access scheme, the government should be focused on helping workers rebuild their super balances for a dignified retirement,” she said.
“We cannot allow the pandemic to be the opportunity the government uses to attack the very social institutions and safety nets that we should be treasuring.”
Opt-in, opt-out will hit workers with higher taxes
The federal government’s secret plan to tear up compulsory super by making the increase to 12 per cent optional would be a $20,000 tax grab on the average Australian family, which could also leave them with up to $200,000 less super by retirement, says Industry Super Australia (ISA).
Wages are taxed at a higher rate than super contributions, leaving little for workers once the tax office takes its cut. An ISA analysis shows that up to two-thirds of an increase could be lost in higher taxes and reductions in other government support payments.
“Figures from the government’s own Retirement Income Review reveal such a plan would leave all income groups worse off – with lower lifetime disposable incomes. It would also be an administrative nightmare to manage an opt-out system – wrapping small business in yet another layer of red tape,” said the superannuation peak body.
“Any Budget boost would be short-lived, as the super savings grab would lead to a far higher pension bill for future generations.”