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NewsCuts to Super: what they could mean for you
Cuts to Super: what they could mean for you

Cuts to Super: what they could mean for you

Tags: Cost of Living Superannuation
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100271122-broken-nest-egg-gettyp.600x400Some Australian workers aged over 50 will be $20,000 or more worse off after an unexpected deal between the Government, the Palmer United Party and crossbench Senators.

The last-minute deal on Tuesday night means the planned increases to compulsory superannuation contributions from 9 to 12 per cent have been delayed by 6 years.

If you’re still working, your Super contributions now won’t rise again until 2021.

3.6 million low-income workers, including over 2 million women, will be further hit, as they will also lose $500 per year when the Low Income Superannuation Contribution is abolished in 2017.

So what’s changed?

The amount of money employers are required to contribute to Superannuation has slowly been increasing from 9 to 12%.

Since July 1 this year, employers have been required to pay a minimum of 9.5% of earnings into superannuation. The minimum amount of superannuation contributions your employer had to pay would’ve increased to 12 per cent by 2019.

The Government’s deal with the Palmer United Party means the increases will be delayed and won’t reach 12 per cent until 2025.

According to research by Industry Super Australia (ISA), for a 50-year-old on $100,000 a year, it will mean almost $20,000 less in contributions by the retirement age of 67.

What about the Low Income Superannuation Contribution?

Australian workers who earn up to $37,000 get a tax rebate known as the Low Income Superannuation Contribution (LISC).

This means the Government pays up to $500 each year into the superannuation accounts of low-income earners to help them save for their retirement.

Under the new deal this contribution will be abolished.

The abolition of the LISC is particular unfair to women, as they make up two-thirds of the 3.6 million lowest paid workers.

The deal was struck so that the Government could abolish the mining tax, and the crossbench Senators such as Clive Palmer could save the Schoolkids Bonus, as this story explains.

The Government argues we will have more money in our pockets in the short-term even if we have less to retire on. What do you think?

Originally posted on .

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John
John from NSW commented:

The strain on employers to magically come up with the extra money reduces incentive to employ. Better to increase returns on market (therefore returns on Super) than the small increase in input amount, which you can voluntarily make up anyway! 

Phillip
Phillip from NSW commented:

How can anyone be of the opinion that it is up to someone else to look after you in retirement. If the compulsory levy paid by your employer from your total package costs is going to be insufficient then increase you contributions, & subsequent payout, through salary sacrifice. Take care of yourself rather than putting your hand out & expecting others to do it for you. 

kevin
kevin from NSW commented:

Well, one of the main focuses of this government has been attacking low income people in Australia. This is just another example. 

sharon
sharon from NT commented:

Have been putting extra money into property- not super. This has allowed me to earn way above what my super would have given me. 

Dirk
Dirk from QLD commented:

You cannot loose money you do not have, so all the hype about this lost super money is just that; rubbish talk. Just because the government relaxes the rules and employers don't have to pay the super levy does not mean that people loose out on super. Take charge of your own destiny and save some money. A 50 yr old on $100000 as in the example should be able to save a hell of a lot more than $20000 in the next 17 years. Dirkus 

Rae
Rae from NSW replied to Dirk:

I agree with you Dirk. As for those comments about it being a drain on employers/businesses - let's not forget some would only pay $5 per hr if they could get away with it! 

Dick
Dick from QLD replied to Dirk:

Dirk has a point,plus the employer is being asked to contribute more. Where does that extra money come from. More likely from increased charges towards whatever product/service that employer is providing. So who pays in the end, generally we do. If you haven't got yourself sorted out by the time you turn fifty (and this is a 50+ forum) what have you been doing all those years. I agree that such a case as demonstrated above that the person should be able to make adjustments to his/her living to make the provision for extra super. How does all this help self funded retirees anyway. 

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