Industry funds spew compulsory superannuation lies

The superannuation industry continues to white-ant the announced retirement incomes review, claiming that abandoning the legislated increase in the superannuation guarantee (compulsory superannuation) would raise our taxes:

“There’s two significant debates going on. The first is whether super should be compulsory or optional, and the second is whether the [amount of super] that employers pay on top of your wages should be frozen,” [Industry Super Australia (ISA) chief executive Bernie Dean] said.

“Both of those are bad ideas. Winding back compulsory super would leave the whole country worse off, as we’d all end up paying more tax to support a flood of people fully relying on the pension.”

Employers are currently required to contribute 9.5 per cent of an employee’s salary into their superannuation fund – but current legislation will see that figure (known as the superannuation guarantee) increase 0.5 per cent a year from 2021 until 2025.

This claim is unambiguously false. In addition to lowering workers’ take-home pay, since the superannuation guarantee is paid for by workers via lower wages, compulsory superannuation tax concessions also cost the federal budget more than they save in Aged Pension costs.

This was made clear by the Henry Tax Review, which explicitly stated:

“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).”

Accordingly, the Henry Tax Review explicitly recommended against raising the superannuation guarantee, also because it would lower workers’ take home pay and have a particularly adverse impact on lower-income earners:

“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…

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 Grattan Institute has come to similar conclusions:

Even slower wage growth will be the result of increasing compulsory superannuation contributions from 9.5 per cent to 12 per cent…

If compulsory super contributions go up, wages will be lower than they otherwise. And the cut to wages from raising compulsory super is big. Really big. By the time it’s fully implemented in 2025-26, a 12 per cent Super Guarantee will strip up to $20 billion from workers’ wages each year, or nearly 1 per cent of GDP…

[Moreover] both the short and long term, superannuation tax breaks cost the budget more than they save in pension payments:

The reason why raising the superannuation guarantee would be so ineffective can be explained by Australia’s flat 15% tax on contributions and earnings. This ensures that those workers on lower incomes receive minimal concessions (or are penalised), whereas those on higher incomes receive the biggest tax concessions on contributions:

Raising the superannuation guarantee would merely heighten inequities already present in the system. It would rob younger (and lower paid) workers of much-needed disposable income and worsen the long-term sustainability of the Budget.

About the only winners from such a policy would be the superannuation industry, which would get to ‘clip the ticket’ on more funds under management and earn fatter profits. This explains their furious opposition to freezing the superannuation guarantee and their constant lies.

Leith van Onselen

Leith van Onselen is Chief Economist at the MB Fund and MB Super. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.


  1. I’m sorry but I really would like more evidence that wages would go up if the amount of super guaranteed was now capped or lowered. Everything about human nature and business in this country tells me the difference would go to ceo bonuses or shareholders not the workers.

      • If you’re a pollie in Melb or a senior public servant wage growth is miles ahead of that.

      • Evidence beyond tautology perhaps.

        Current employee remuneration is 100.0 PAYG and 9.5 SG, and the policy direction is 100.0 PAYG and 12.0 SG.

        You’re asserting that if SG is frozen at 9.5, then PAYG will automatically become 102.5, because business will voluntarily seek to disperse that marginal 2.5 SG somewhere to the employee, if not their super account.

      • The90kwbeastMEMBER

        Sorry but I agree with the others. Given our current starting position it is difficult to see wages rising if the SGC was left alone. Employers because of the profit motive will simply always pay the least amount of wages necessary to do the work.

        At least if the SGC is increased there is a legal mandate to pay your workers more, even if employees can’t access the money for a long time.

        • The whole problem with that is returns down the road can go poof, not to mention zero ethical forbearance on passive investment E.g. people are forced to give deferred spending to private managers w/o any granular information about its distribution. Then some will scratch their head at QE et al over bailing out the miscreants, under the banner of saving the mopes retirement funds.

          Not to mention the corrosive PE aspects …..

          • The90kwbeastMEMBER

            Sure. But the the poor management of money in super funds is unrelated to the point that was raised by AngryMan, which is that employers generally won’t pay more if the SGC stays where it is. I completely agree though that transparency and investment effectiveness in superfunds leaves a bit to be desired.

      • It is always the same story, Leith.

        In the Prices and Incomes Accord, the trade unions agreed to forgo a national 3% pay increase which would be put into the new superannuation system for all employees in Australia

        People forget the majority of pay increases in Australia as still negotiated by either EBA, or Fairwork Australia for the minimum wage. It ends up being a cost to the employee and not the employer.

      • HadronCollision

        I’m glad you’re not a lawyer as your comment is not evidence

        What rusty penny et al have said would be the starting assumption for what would happen

        That’s not to say the ride should happen just that you can’t advocate for it’s freezing absent a legislated pay increase instead . Relying on “them bosses would just pay it”
        Is frankly nonsensical

  2. The first 2 brackets (0-18,200 + 18,200 – 37,000) are not accurate — these people pay 0 contributions tax in net terms thanks to the LISTO. Their numbers should be changed from -15 & 4 to 0 & 19.

    • Mining BoganMEMBER

      Pfft…had the misfortune to travel on stupid peak hour services yesterday. Thought I was going to see a fight actually. Folk were crowding to get out the door at a stop when a little subcontinent type told a big Strayan type to move so he could get out. Big Strayan type turned, got in tiny subcontinent face and told him in no uncertain terms that he was trying to hop off too. Little subcontinent type knew he was outnumbered and ducked his head but little subcontinent wife decided to take up the battle.

      Hilarity ensues…

      • Mining BoganMEMBER

        Indeed. I well remember the failure between Townsville and Ingham about 15 years ago. Somewhere around the Bambaroo area I think. A tad dry it was.

        I was actually wondering how much it uses compared to cotton.

        • Much like the Ord River scheme was about agriculture and rice the primary crop back in the late 70’s. The failure to establish a commercial crop was not so much to do with water supply but pests (magpie geese) and access to markets. My limited understanding is that rice is a water intensive crop which is why it grows well, or use to, in Asia; monsoons and the soil types in Asia are more conducive to growing rice than red arid dust.

          • I had an old friend part of that, Ord River etc… told me how many people got burnt

            The original trial was a small scale, and it flourished. A whole bunch of punters here thinking they’d make a motza with unlimited ord river water…. but unbeknown to all, too small for magpie geese to pay attention to

            When it went to a commercial scale, somehow the magpie geese knew it was there, and swarms of them came and devastated the crop, and there was nothing they could do about it.

            It would have been heartbreaking at the time, but it makes a humorous story in 2019.

    • We grow rice as a dry crop in oz, so afaik its not so water intensive. Cotton is worse i believe. I think the main reason its grown as a wet crop in asia is because they have plenty of water, and weeds cant grow in flooded fields. Happy to be corrected though.

        • Appears so, im just googling it actually as my previous comment was based on something i recall reading many years ago.

          • Mining BoganMEMBER

            Yeah, me too. I know the ones that failed up north were wet but after one year the farmer gave them away and the cows moved back in. Google says there’s a bit up that way but doesn’t say if it’s wet or dry.

            Surely there’s a rice expert somewhere who knows.

          • Can’t vouch for the numbers but here goes; Cotton’s average irrigation requirement is 7.8 megalitres per hectare, rice requires 12.6 megalitres per hectare, fruit and nut trees 5.6 megalitres per hectare and cut flowers and turf use 4.9 megalitres per hectare. What the harvest weight per hectare is for each commodity is I’ve no idea but this will give an idea of megalitre per kg comparison.

            Source as follows but it’s somewhere between the Cotton Growers Association figures to produce 87 tons of cotton per 100ml of water and the WWF that had 87 grams of cotton per 100 megalitres.


  3. China PlateMEMBER

    I’ve been set up
    I’ve been hanging out in morning links after this from Harry

    “Hi everybody!
    Should we all agree to return here in the arvo in the absence of the afternoon page? Forget what it’s called.”