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.
Frequently Asked Questions about this Article…
What is the health insurance rebate means test and how does it affect my taxes?
The health insurance rebate means test is a policy change that reduces the government rebate on private health insurance for higher and middle-income earners. The article frames it as effectively an increase in tax for those groups because they receive less rebate and may face extra tax charges under the Medicare levy surcharge if they go without private cover.
What are the Medicare levy surcharge income thresholds and how much extra tax could I pay without private health insurance?
According to the article, the Medicare levy surcharge applies as an extra 1% tax for people who don't have private hospital cover if their income exceeds the thresholds cited: $77,000 for a single person and $154,000 for a family.
How does means testing the health insurance rebate influence the decision to keep private health insurance?
Means testing reduces the rebate for higher and middle-income earners, making private insurance relatively more expensive. Combined with the Medicare levy surcharge (an extra 1% tax for those above the thresholds who don’t hold private cover), the changes can financially pressure people to either pay more for private insurance or face higher taxes.
What changes were made to the superannuation guarantee charge (SGC) and what does that mean for employer contributions?
The article says legislation was passed to increase the SGC contribution rate from 9% to 12%. The intention is to boost retirement savings for working Australians, but the increase doesn’t by itself fix structural issues in how contributions are calculated.
How can salary sacrifice reduce my employer's compulsory super contribution?
Under the current rules described in the article, employers pay SGC on an employee’s ordinary-time earnings (not on overtime). If you salary sacrifice and your reported salary is reduced, many employers reduce the SGC they pay because the contribution is calculated on that lower salary. For example, someone on $60,000 would have a 9% employer contribution of $5,400. For every $1,000 salary sacrificed, the employer can reduce their SGC by $90 (9% of $1,000). Sacrificing $10,000 could cut the employer’s contribution by $900; at a 12% SGC rate that cut would be $1,200.
Will the government force employers to pay SGC on pre-salary-sacrifice earnings?
The article quotes a government spokesman saying there is no 'plan to introduce legislation to force employers to contribute the superannuation guarantee charge on the pre-salary sacrifice employment basis.' In other words, no such legislative fix was planned at the time of the article.
Are opposition parties or the Greens promising fixes to stop employers reducing SGC when employees salary sacrifice?
The article reports that the opposition spokesman on superannuation, Mathias Cormann, did not respond to requests for comment. It also says the Greens are focused on increasing the tax on super contributions for middle and high-income earners rather than addressing the salary-sacrifice/SGC interaction, suggesting little prospect of a near-term fix from those parties.
What do these policy changes say about political trust and policy stability for everyday investors?
The article highlights low public trust in politicians (citing a 2011 Reader’s Digest trust survey where politicians ranked 44) and gives examples of government backflips and broken promises on issues like carbon tax and superannuation. For everyday investors, that signals political risk and the possibility of unexpected policy shifts affecting taxes, health rebates, and retirement rules, so it’s wise to factor policy uncertainty into financial planning.
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