Both major parties hit pause on further super changes
Policy settings are now in place that will likely see most people aged under about 40 with adequate retirement savings. That's because both sides of politics say they will increase the superannuation guarantee to 12 per cent from 9.25 per cent now. Under the government's plan, the 12 per cent is reached by July 1, 2019. That's why it is those under about 40 now who will benefit - they will have at least 15 years of 12 per cent superannuation guarantee.
Under a Coalition government, the super guarantee rises more slowly and does not hit 12 per cent until 2021. That's more than two parliamentary terms away and gives plenty of time for business lobby groups to persuade a Coalition government not to implement the full increase.
The government's plans for slowing the growth of the superannuation tax concessions are good, even if they do not go far enough. They include those on more than $300,000 a year paying a contributions tax of 30 per cent instead of 15 per cent.
From July 1, 2014, under the government plan, retirees will be taxed 15 per cent on annual earnings in their super above $100,000 where there is no tax on earnings now.
According to the government, that should only affect those with retirement savings of $2 million or more.
To help low-paid workers save for their retirement, the government provides a tax cut of up to $500 a year to those earning up to $37,000.
The tax cut in effect removes the 15 per cent contributions tax for low earners. The Coalition has said it will, if elected, remove this tax cut for low earners.
To help those with not all that long to go before they retire, the limit that can be salary sacrificed into superannuation has been increased. It's $35,000 this financial year for those aged 60 and over on July 1, 2013.
The cap is $25,000 for everyone else. From July 1 next year, the $35,000 limit will apply to those aged 50 and over.
The Coalition supports the higher caps.
Frequently Asked Questions about this Article…
Both major parties have committed to pause making further changes to superannuation policy, which means the sector can expect stability and no immediate new reforms. The Rudd government’s commitment (following an earlier Coalition commitment) was framed as relief for an industry battling fatigue.
Both parties support increasing the superannuation guarantee to 12 per cent (up from 9.25 per cent). Under the government’s plan the 12 per cent SG is reached by 1 July 2019. That rise means most people aged under about 40 will benefit most, since they would have at least 15 years of higher 12 per cent contributions into retirement.
Yes. The government’s plan reaches 12 per cent by 1 July 2019, while the Coalition’s timetable is slower and does not hit 12 per cent until 2021. The Coalition’s slower schedule also gives more time for business lobby groups to try to influence implementation.
Yes. The government plans to slow the growth of super tax concessions by increasing the contributions tax for people earning more than $300,000 a year from 15 per cent to 30 per cent.
From 1 July 2014 the government proposed taxing retirees 15 per cent on annual earnings in their super above $100,000; currently there is no tax on those earnings. The government says this change should mainly affect people with retirement savings of $2 million or more.
Yes. The government offers a tax cut of up to $500 a year for people earning up to $37,000, which effectively removes the 15 per cent contributions tax for those low earners. The Coalition has said it would remove this tax cut if elected.
This financial year the salary sacrifice cap is $35,000 for people aged 60 and over on 1 July 2013, and $25,000 for everyone else. From 1 July next year the $35,000 cap is scheduled to apply to those aged 50 and over. The Coalition supports the higher caps.
Combined, the policy settings (a phased rise to 12 per cent SG and targeted tax changes) are expected to improve retirement savings for many — especially younger workers who will get more years of higher employer contributions — while introducing higher taxes or limits aimed at higher-income earners and very large balances.
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