The superannuation guarantee is legislated to increase from 9.5 per cent to 12 per cent between 2021 and 2025, and Treasurer Josh Frydenberg has said that the federal government has no plans to change the legislated increase. However, a growing number of Liberal backbenchers are said to be against the increase, and are hopeful that the proposed review of retirement income will lead to a change of heart on the proposal. In particular, Tim Wilson, the Liberal chair of the House Economics Committee, says the argument for the increase when compared to lifting wages now “has always been questionable”.
This has prompted Labor’s treasury spokesman, Jim Chalmers, to demand Prime Minister Scott Morrison to guarantee that superannuation will be lifted to 12%. From The New Daily:
“It’s beyond hypocritical that the very same Coalition MPs who pretended to be champions of retirees now want to attack the retirement savings of Australian workers,” he said.
“Scott Morrison needs to come out today and pull his rebel backbenchers into line.
“The Liberals have already delayed Labor’s important reforms to increase the superannuation guarantee to 12 per cent so workers can enjoy a more dignified retirement.”
Somebody should sue the ALP and take the term “labor” from its title. Because it is clear that it no longer represents the ordinary Australian worker, but rather the blood sucking superannuation industry.
Anybody worth their salt knows that compulsory superannuation is paid for by workers, not employers. Therefore, any legislated increase to 12% would come straight out of workers’ take home pay and lower wage growth.
This fact was made clear by the Henry Tax Review:
Although employers are required to make superannuation guarantee contributions, employees bear the cost of these contributions through lower wage growth. This means the increase in the employee’s retirement income is achieved by reducing their standard of living before retirement.
Which explicitly recommended against raising the superannuation guarantee because it would adversely harm lower-income workers (which Labor is supposed to represent):
The retirement income report recommended that the superannuation guarantee rate remain at 9 per cent. In coming to this recommendation the Review took into the account the effect that the superannuation guarantee has on the pre-retirement income of low-income earners.
The Parliamentary Budget Office came to a similar conclusion in April:
“The increase in the superannuation guarantee to 12 per cent will likely lead to lower wage increases, shifting a greater proportion of earnings into the superannuation system”.
Whereas former Labor leader, Bill Shorten, has also explicitly acknowledged that compulsory superannuation is paid for via lower wage growth:
Because it’s wages, not profits, that will fund super increases in the next few years. Wages are the seedbed of the whole operation. An increase in super is not, absolutely not, a tax on business. Essentially, both employers and employees would consider the Superannuation Guarantee increases to be a different way of receiving a wage increase.
As has former Labor Prime Minister Paul Keating:
“The cost of superannuation was never borne by employers. It was absorbed into the overall wage cost… In other words, had employers not paid nine percentage points of wages as superannuation contributions to employee superannuation accounts, they would have paid it in cash as wages”.
Raising the superannuation guarantee to 12% would also unambiguously worsen the federal budget.
Again, the Henry Tax Review was explicit on this point:
“An increase in the superannuation guarantee would … have a net cost to government revenue even over the long term (that is, the loss of income tax revenue would not be replaced fully by an increase in superannuation tax collections or a reduction in Age Pension costs).”
As is the Grattan Institute:
“Lifting compulsory super to 12 per cent of wages would cost taxpayers an extra $2 billion to $2.5 billion each year in super tax breaks, overwhelmingly to high-income earners. And those super tax breaks would dwarf any budget savings on the age pension until about 2060… both the short and long term, superannuation tax breaks cost the budget more than they save in pension payments”:
There is also no sense in raising the superannuation guarantee when we know that, because of the 15% flat tax on contributions/earnings, the lion’s share of benefits will flow to higher income earners:
In 2017-18, total household superannuation benefits received was $112,009m. Households in the highest income and net worth quintile received 47% and 74% of total household superannuation benefits, by comparison households in the lowest income and net worth quintile received 3% and 2% of total household superannuation benefits. There was an increase in the share of total household superannuation benefits received by households in each quintile from the lowest to the highest for both income and net worth quintiles, with the increase being particularly steep from the fourth to the highest net worth quintiles. The ratio of the value of the highest to lowest quintiles was 15.5 and 45.7 for income and net worth quintiles for superannuation benefits received.
Clearly, Labor cares far more for the industry rent-seekers than ordinary Australian workers and taxpayers, who would have to foot the bill for its idiotic 12% compulsory super obsession.