Many media reports are suggesting Bill Shorten the minister for Financial Services and Superannuation is about to raid the superannuation piggy bank to keep their promise of a budget surplus. (Labor is reportedly considering increasing superannuation tax) While it is prudent to ensure governments are run on budget over the business cycle it is very poor governments that try to achieve surplus at all cost. Superannuation is a great structure for building wealth for retirement see What is Super but many Australians are distrustful of the super system and constantly changing superannuation rules. I can certainly understand their distrust and confusion. Over the last number of federal labor budgets we have seen continuous tweeks to the system to help improve the budget bottom line.
- Salary sacrifice contribution limit was $50,000 in 2007 for those under age 50 and $100,000 for those above age 50. The current maximum contribution limit is $25,000 no matter what age, including your employer super guarantee payment.
- Government co-contribution has been reduced from $1500 to $500.
- Eligibility for the co-contribution was based on taxable income but it was then changed to add back any salary sacrifice contributions as well as any employer guarantee contributions. This had the effect of significantly reducing those available to receive the co-contribution.
- The government was paying $1.50 for every $1 of eligible contribution that has now been reduced to 50c for every $1 of eligible contribution.
Most people in their 30’s and 40’s do not have sufficient surplus funds to contribute more to super as they have large mortgages and school fees. In their 50’s they finally have the mortgage payed off and are finally in a position to contribute more to super to fund their retirement and not be a burden on society yet this government is now significantly restricing them from making the most of their savings. We do not want to see them further raid the super piggy bank to fund their spending promises and further erode confidence in what should be a great savings system for Australians. Please let The Hon Bill Shorten MP know what you think of his savings measures by emailing him at: ministerial@treasury.gov.au
To give you an idea of the impact on someone 55 years of age earning $100,000 in super prior to all the changes since 2008 and now.
| 2007 | 2012 | |
| Income | $100,000 | $100,000 |
| Employer contributions | 9,000 | 9,000 |
| Salary Sacrifice | 70,000 | 16,000 |
| Taxable income | 30,000 | 91,000 |
| Personal tax paid | 3,600 | 21,643 |
| After tax income | 26,400 | 69,357 |
| After tax contribution | 1,000 | 1,000 |
| Co-contribution | 1,500 | 0 |
| Total contributed to super | 80,500 | 25,000 |
| Less tax | 11,850 | 3,750 |
| Increase in Super | 68,650 | 21,250 |
| Total tax paid across personal and super | 15,450 | 25,393 |
| Extra tax paid from 2007 to 2012 | $9,943 |
The above does not take into account medicare levy or the low income tax offset or any other offsets. In reality the position is far worse as if you are a member of a working couple the figures could actually be double. The above is only been prepared to give you an idea of the impact of the changes that had already occured since 2008 and every clients situation will be different but we don’t want the government continually undermining the super system. So please share this article with friends and family and make it known to the government that you don’t want them to raid your super.