Earlier this year, the Productivity Commission (PC) recommended recommended the federal government commission a review of the retirement income system “in advance of any increase in the Superannuation Guarantee rate”:
RECOMMENDATION 30: INDEPENDENT INQUIRY INTO THE RETIREMENT INCOMES SYSTEM
The Australian Government should commission an independent public inquiry into the role of compulsory superannuation in the broader retirement incomes system, including the net impact of compulsory super on private and public savings, distributional impacts across the population and over time, interactions between superannuation and other sources of retirement income, the impact of superannuation on public finances, and the economic and distributional impacts of the non-indexed $450 a month contributions threshold. This inquiry should be completed in advance of any increase in the Superannuation Guarantee rate.
On Friday, the Morrison Government launched this review, which will investigate whether compulsory superannuation is reducing costs for the federal budget, as well as whether the superannuation guarantee (compulsory superannuation) should be lifted to 12%:
Former senior Treasury official Mike Callaghan will chair the review panel, Mr Frydenberg announced.
Self managed superannuation funds may be insulated from the review, with one of the three panel members, Deborah Ralston, having chaired the SMSF Association and campaigned against Labor’s election plan to axe refunding excess franking credits…
The review, recommended by the Productivity Commission, is set to probe whether the $2.8 trillion superannuation pool and the system’s generous tax breaks are effectively reducing the cost to taxpayers of the government age pension…
The review has not been precluded from acting on the call by Liberal backbenchers and the Productivity Commission to reconsider the scheduled incremental increase in compulsory superannuation contributions from 9.5 per cent to 12 per cent due between 2021 and 2025.
Treasury, where Mr Callaghan worked for decades, has typically been sceptical of increasing the superannuation guarantee rate…
“It is important that the system allows Australians to achieve adequate retirement incomes, is fiscally sustainable and provides appropriate incentives for self-provision in retirement,” the terms of reference said.
Already, Committee member Deborah Ralston has canvased making superannuation contributions voluntary for lower-income earners, which has angered industry lobbyists:
[Deborah Ralston] suggested that compulsory superannuation be made ‘‘voluntary’’ for low-income workers because the ‘‘forced savings’’ would lead to lower wages and some low-paid people would end up paying higher taxes on their super earnings than on their take-home pay.
‘‘Compulsory superannuation means that current wages are withheld for future retirement benefits,’’ she said in the letter.
‘‘As lower-income workers are likely to be mainly dependent on the age pension in the future, is this level of forced savings justified?
‘‘An effective tax rate on wages, compulsorily withdrawn, of 15 per cent inside the fund is higher than some workers pay on their take-home pay…
Dr Ralston also said the government should end tax concessions for ‘‘very large’’ multimillion-dollar superannuation account balances, to save it money and to make the system fairer for younger taxpayers.
Industry Super Australia chairman Greg Combet on Sunday slammed the proposal to make super voluntary for low-income workers and called on the Morrison government to reconsider Dr Ralston’s appointment to the retirement inquiry.
Mr Combet, a former ACTU secretary, said the idea was ‘‘a dangerous proposal that will see vulnerable workers slugged more in taxes only to end up with less money in retirement’’.
Obviously, Greg Combet’s claim that “vulnerable workers [would be] slugged more in taxes only to end up with less money in retirement” is a flat-out lie, since compulsory superannuation is unambigously paid for by workers through lower take-home pay.
The fake Labor Party’s resident idiot, Jim Chalmers, also attacked any proposal to abandon the scheduled increase in the superannuation guarantee:
“After six years of attacks on retirees and older Australians, Scott Morrison and Josh Frydenberg must rule out the possibility that this review will become a stalking horse for cutting the pension, including the family home in the pension asset test, and further delaying the legislated increase in the Superannuation Guarantee to 12 per cent,” he said.
Gee whiz Jim. Have you not heard of ‘due process’? How about letting the inquiry run its course?
Finally, the Australian’s Judith encapsulates the lobbying shenanigans:
The stakes are very high and the lobbyists are playing for keeps. Individual parliamentarians are targeted and predictions of catastrophe are issued should the “wrong” choices be made…
The superannuation industry is single-minded in its determination to ensure that the government goes through with the legislated plan to lift the SGC to 12 per cent by 2025…
The bottom line is this: the superannuation funds are more interested in ensuring any policy changes benefit the funds rather than the members. Their intense lobbying efforts are directed to this aim.
Given past inquiries like the Henry Tax Review have recommended against lifting the superannuation guarantee, the industry rent-seekers and Labor are getting nervous. And that’s a good thing.