The Morrison government is reportedly weighing allowing workers to choose between putting money in their super or having more take-home pay.
Under the proposal, superannuation would be lifted up to 10 per cent on 1 July 2021, before workers are asked to decide between opting in for future superannuation increases or a rise in take-home pay.
However, Industry Super Australia (ISA) has labeled the proposal “a secret tax on Australians”, explaining that take-home pay is taxed at a higher rate than superannuation.
According to ISA, the move, reneging on the legislated super guarantee increases, could potentially cost workers billions.
“Wages are taxed at a higher rate than super contributions, leaving little for workers once the Tax Office takes its cut. ISA analysis shows that up to two-thirds of an increase could be lost in higher taxes and reductions in other government support payments,” ISA deputy chief executive Matthew Linden said.
“Removing the guarantee in the super guarantee to make it ‘optional’ is a recipe for higher taxes, lower lifetime incomes and a red tape nightmare for business.”
The industry funds have labeled the proposal an “underhanded plan” to make super optional, which would force workers to pay themselves a wage increase by sacrificing their retirement savings – leaving the average 30-year-old couple up to $200,000 less at retirement.
“This isn’t choice – it’s a sneaky tax grab that will leave people worse off and rip up one of the system’s founding principles,” Mr Liden continued.
The Australian Institute of Superannuation Trustees (AIST) also weighed in on the issue, opining that the government looks “intent on undermining financial outcomes for Australians in retirement”.
“There is a broad understanding that unless we are compelled to save a portion of our wages, very few of us will have enough money for a financially secure retirement,” said AIST chief executive Eva Scheerlinck.
“There are lots of ways to deal with low wage growth, but forcing people to use their retirement savings to fund their own pay rise shouldn’t be one of them.”
