In his maiden speech, newly elected NSW senator Andrew Bragg brought up the idea that superannuation should be an opt-in system rather than compulsory, citing the adoption of such a change being capable of bringing big savings to the government.
He remarked that “super should be made voluntary for Australians earning under $50,000”.
According to his option, “taxpayers could simply tick a box to get a refund when filing an annual tax return”.
Mr Bragg said he had commissioned modelling from Rice Warner actuaries in considering such a reform, “which estimates a saving to government of $1.8 billion in the first year alone”.
Helping Australians get their first home
The senator said that the removal of superannuation as a compulsory aspect of salary would make it easier for Australians to own their first home, with many currently priced out of the market.
“Super is making home ownership so much harder for lower-income Australians. The CIS found that the average deposit for a first home has doubled between 2000 and 2015. Since super started in 1992, every single age group has experienced lower levels of home ownership,” Mr Bragg highlighted.
Does the maths stack up?
Industry Super Australia analysis said that removal of the compulsory super contribution for a person on $50,000 a year, would simply contribute to a higher personal income tax bill.
It said this could see an individual paying an additional $1,710 a year in tax, which is an increase of nearly $1,000 on money that would otherwise be in their super account.
“Any claim that this would ‘save’ $1.8 billion conveniently ignores the fact that wages are taxed at a higher rate than superannuation – meaning this would actually cost low-income workers more in the long run,” Industry Super Australia said.
Industry Super Australia chief executive Bernie Dean commented that “this extreme plan will see low-income workers pay more tax only to end up with less money at retirement”.
“Taking away compulsory super for low-income earners would condemn some of our most vulnerable Australians to poverty in retirement,” continued Mr Dean.
Calling it a “flawed plan”, such a change would see low-income workers pay more tax for less money at retirement, Industry Super Australia said, while everyone will foot the bill as dependence on the pension increases.
Cameron Micallef is a journalist at Nest Egg, writing primarily about personal wealth and economic markets.
Prior to this, Cameron worked for Australian Associated Press. He graduated from the University of Wollongong with a double degree in communications and commerce.