Labor ploy just a super sneaky way of balancing the budget
Politics and elections are all about spin. An example of this was the statement last week by Prime Minister Julia Gillard when addressing concerns about the Labor Party raiding the super piggy bank.
Ms Gillard said: "I can assure people superannuation is a Labor creature and we will always nurture it well." Making constant changes, reducing benefits, and looking at increasing taxes on it is not nurturing, it is weakening it.
Another example of spin was a statement last July by Bill Shorten, the Minister for Superannuation, when announcing a tax break for low-income earners. Mr Shorten said: "From today, the Gillard government is giving a big helping hand to low-income individuals [to help them] prepare for life after work by helping them build their superannuation savings."
It can be argued that there is some inequity in a system where the lowest-paid Australians get a tax benefit of 5.5 per cent on super contributions, while the highest paid receive a tax benefit of 31.5 per cent. What can be disputed is the sincerity of the Labor government really being interested in helping low-income earners build super.
The new low-income super contribution will take the form of an extra government super contribution up to a maximum of $500 a financial year. To be eligible a person must have an adjusted taxable income of less than $37,000, not hold a temporary resident visa, and 10 per cent or more of their total income must come from employment or running a business.
Adjusted taxable income is calculated by adding to a person's taxable income:
Adjusted fringe benefits;
Tax-free government pensions or benefits;
Reportable super contributions; and
Net investment losses.
The low-income contribution will be 15 per cent of concessional contributions to a maximum $500. These are the superannuation guarantee charge and other contributions made by employers, salary sacrifice contributions, and self-employed super contributions. Those eligible for the extra contributions, that receive less than $222 in concessional contributions, will receive a minimum low-income contribution of $20.
If this was the only change made by the Gillard and Rudd governments to assist low-income earners their sincerity would not be in question. However since Labor came to power many changes have been made, including the super co-contribution for low-income earners decreasing from a maximum of $1500 to $500.
The super co-contribution scheme was introduced to reward low-income earners prepared to build their own super rather than just relying on employer contributions. When it was first introduced, every dollar of after-tax non-concessional super contribution made by a person with income of less than $30,342 received a co-contribution of $1.50 up to a maximum of $1500.
A person making a non-concessional contribution in 2009 of $1000 with $30,000 in income received a co-contribution of $1500. For a person making a non-concessional contribution of $1000 the co-contribution for 2013 has dropped to $500, which although offset by a low-income contribution of $405, leaves them $1005 worse off.
Had the Rudd and Gillard governments been genuinely interested in nurturing the system and the super of low-income earners, instead of being
more concerned with balancing the budget, they would not
have decreased the co-contribution, decreased the maximum contributions levels, and destroyed the confidence in superannuation by constantly speculating on how taxes on it can be increased.