Super anomaly bestows no credit on politicians

IN THE 2011 Reader's Digest trust survey, politicians came in with a ranking of 44, only slightly ahead of last-placed telemarketers, ranked 45.

IN THE 2011 Reader's Digest trust survey, politicians came in with a ranking of 44, only slightly ahead of last-placed telemarketers, ranked 45.

If you want reasons why politicians are not trusted you need look no further than the new health insurance rebate means test and superannuation.

After backflipping on not introducing a carbon tax, the Gillard government has reversed its position on means testing the health insurance rebate. In essence, the means testing of the rebate is an increase in taxes on high and middle-income earners. Insult is added to financial injury when you factor in the extra tax middle and high-income earners pay if they don't take out health insurance.

Under the Medicare levy surcharge tax system, a single person earning more than $77,000, and a family with income of more than $154,000, pay an extra 1 per cent tax if they don't have health insurance. In reality, the health rebate means test is another tax disguised as a social equity initiative.

When it comes to super, the examples of reneging are numerous. Despite Kevin Rudd saying after being elected he would not change super one bit, it did not take long for changes to be made.

Another example is the Gillard government's passing of legislation to increase the superannuation guarantee charge (SGC) contribution rate from 9 to 12 per cent.

Allegedly this is being done to help improve the retirement savings of working Australians.

If the government was serious about maximising super benefits, it would fix a problem with the way the SGC system works.

Under the present regime an employer is required to make a super contribution of 9 per cent of an employee's ordinary-time earnings. This means an employer must pay a 9 per cent super contribution on the wage or salary paid to an employee, but not on amounts paid for overtime.

When employees decide to maximise their super retirement benefit by sacrificing salary or wages as an extra super contribution, many employers use this to reduce the amount of SGC contribution they make because the amount paid to the employee is reduced.

For example, a person on $60,000 a year would normally have their employer make a compulsory super contribution on their behalf of $5400. Under the present regime, for every $1000 they sacrifice as an extra super contribution, their employer can cut the compulsory super contribution by $90.

This means someone who wanted to boost their retirement funds by salary sacrificing $10,000 a year does so at the cost of their employer super contribution reducing by $900. Once the SGC increases to 12 per cent, the employee will have reduced the employer's contribution by $1200.

A government spokesman said there was no "plan to introduce legislation to force employers to contribute the superannuation guarantee charge on the pre-salary sacrifice employment basis".

If workers are hoping the opposition and Greens are interested in fixing this, they will be disappointed.

Opposition spokesman on superannuation Mathias Cormann was contacted for a comment. On both occasions no response was received. The Greens are focused on increasing the tax on super contributions for middle and high-income earners.

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