High income earners are the main beneficiaries of the proposed changes to Super
Reducing the Superannuation Surcharge percentage
Comment – Only helps the rich. In 2001/2002 only those on adjusted taxable incomes above $85,242 get surcharged and the maximum surcharge only applies to those above $103,507. The surcharge is a very inefficient tax to collect and some of the cost burden is spread onto other super members. Reducing the surcharge makes it even more complicated. The surcharge should either be left alone or abolished. However abolishing it would be of greater benefit to the rich.
The ALP propose reducing the contributions
tax (which we all pay) instead. This is much fairer than reducing the surcharge.
They suggest reducing the contributions tax from 15% to 13% for everyone
OR reducing it to 11.5% for those over 40. The 2nd of these suggestions
would be more expensive to implement and less fair. A better solution would
be to abolish the up front tax and shift it to the point at which the benefit
is taken (like most other countries).
A reduction in the tax rate on excessive ETPs From 1 July 2002
Comment – The tax imposed on the
excessive amount of an eligible termination payment (whether from an employer
or from a Superannuation fund) will be capped at 48.5%. The excessive amount
is the part of the payment that exceeds the individual reasonable benefit
limit (currently, $529,373 for lump sum payments and twice that where more
than half is taken as a complying pension). At present, excessive amounts
may be taxed at rates higher than 48.5%, particularly for high income earners
on the superannuation surcharge. The main winners from this are high income
A co-contribution scheme for lower income
Comment – Since the election they
have made this promise more restrictive. Now the limits include reportable
fringe benefits and the benefit is restricted to those who already receive
super from their employer. Contributions that attract the co-contribution
will not be tax deductible. Few people under these limits can afford to
make contributions unless they have a spouse on a high income in which
case it doesn’t really help the target group of low income earners.
From 1 July 2002, recipients of the Baby Bonus who would not otherwise be able to contribute to superannuation, will be eligible to contribute to a superannuation fund
Comment – Obviously the baby bonus
wasn’t just meant to be for those who couldn’t afford to have children.
This proposal advantages those who are better off. See the ‘white picket
fence’ comments in the next section. The ‘baby bonus’ is a refund to mothers
who leave the workforce after the birth of their first child the tax paid
on their income in the year before the birth of the child. The bonus will
be paid from 1 July 2002 for first children born on or after 1 July 2001.
The repayment of tax will occur over a five-year period (depending on how
long your stay out of the paid workforce), with the maximum payable being
$12,500 in total, corresponding to tax on an income of $52,666. Low-income
earners and mothers who were not in the workforce are guaranteed a minimum
annual credit of $500. The tax refund is not means tested against the income
of the partner of the mother, but will be reduced if the mother returns
to work within five years of the birth of the child. Recipients of the
Baby Bonus will be allowed to contribute the Baby Bonus to superannuation
even if they have never been in the workforce.
Permit splitting of superannuation contributions
in accumulation funds by couples
Comment – It is common
for women in heterosexual relationships to have insufficient super if they
have had time outside of paid employment. The proposal allows couples where
the principle earner might otherwise exceed their own RBL to put their
money into their spouses account. Income splitting arrangements tend to
be of more benfit to those who are better off and in this case it helps
John Howard’s 1950s white picket fence family. Mums are meant to be at
home earning their baby bonus while dads go off to work.
Parents and other relations can contribute superannuation on behalf of children of up to $3,000 over 3 years
Comment – This is novel because
until now Superannuation has been linked with employment. There is no tax
advantage for you in making contributions for your children. However your
children will benefit from the impact of compound interest. Putting a small
amount in early saves having to put in a much larger amount later in life.
Requirement for quarterly Super Guarantee contributions
Comment – 1st proposed by unions this change ensures that you lose no more than a quarter of a year’s super if your company goes belly up – not a big issue for the public sector. However the government has done something sneaky that will disadvantage casual employees who work for different employers each month. Previously an employer had to pay super guarantee for any employee that they paid more than $450 a month. Now they only have to pay it if they pay more than $1,350 a quarter. Although this is the same amount per month it disadvantages casuals who may earn more than $450 in a particular month but less than $1,350 per quarter from any one employer.
In theory this should not be a problem
in the NSW public sector because FSS requires ALL employees to be paid
compulsory employer contributions regardless of how much they earn per
month/quarter. Unfortunately not all agencies know this. To help stop the
casualisation of the workforce you can check to see that your agency is
not getting casuals on the cheap. The PSA could do more to publicise the
fact that staff who receive less than $450 per month (or $1,350 a quarter
under the proposed changes) are still entitled to employer contributions.
Allowing temporary residents to access their superannuation benefits after departing Australia from 1 July 2002
Comment – Mainly designed for short
term executives from overseas. This measure will also benefit the backpackers
who seem to be occupying more and more temporary positions in the public
sector. They will have a choice of paying full tax to get their super or
preserving it within the concessionally taxed environment till retirement
like the rest of us.
Employers must notify employees of the amount and destination of compulsory contributions
Comment – This was another union
suggestion. Check your payslip. If your agency doesn’t already comply then
take this up via your Joint Consultative Committee.
$28.7 million budgeted for a ‘choice of funds’ information campaign
Comment – This is an extraordinarily
large amount of money for what is essentially a propaganda exercise. This
initiative is driven by the Coalition’s ideological hatred of the not for
profit industry schemes which have equal employer and union representation.
The Coalition wants to boost the fortunes of their mates in the financial
institutions who run retail super schemes (with higher fees and commissions).
NSW public sector employees are already permitted to have their super guarantee
contributions directed to their fund of choice. The legislation is unlikely
to get through the Senate unless the Coalition sweet-talks the Democrats.
Continuing super contributions to age 75
Comment - However, you will not be eligible for a tax deduction on your contributions and employers will not be required to make compulsory super contributions for workers over 70.
The information in this article
is not financial advice.
Other Super Stories
To receive YOUR
SUPER stories and updates, join the free PSABetterDeal email list by
sending a blank email to: PSABetterdealemail@example.com
Did you know?
Did you know that it was an official from another union that won our super members the right to be covered by the ACTU’s Call Centre Code? The Fire Brigade Employees' Union's Simon Flynn secured the win for staff in the Superannuation Administration Corporation (now trading under the name Pillar).
Simon was quoted in Workers Online as saying “I don't see why other union reps on state boards can't do the same". We agree.
Did you know?
We work for