Financial planning and superannuation industry bodies have welcomed the Superannuation Guarantee (SG) Bill’s passage through Parliament.
On Wednesday (23 November) the House of Representatives passed legislation on the gradual increase of compulsory superannuation contributions from 9 per cent to 12 per cent.
The legislation includes measures to remove the age limit of the Superannuation Guarantee as well as removing superannuation contributions tax for people earning less than $37,000 per annum.
“The Financial Planning Association (FPA) welcomes the Government’s passing of the Superannuation Guarantee Bill and the measures incorporated to assist our aging population with the incentive to remain in the workforce as well as maximising the retirement benefits for low income earners in Australia,” said Mark Rantall, CEO of the FPA.
“This legislation better supports all workers without discriminating against age or wage. The FPA supports initiatives taken by Government to assist Australians in planning their financial futures and ensuring they are better prepared for retirement.
“An increase in the Superannuation Guarantee and encouragement to seek professional financial advice will enhance the quality of life during retirement, ensure income adequacy, reduce longevity risk and decrease reliance on the age pension for Australia’s ageing population. It is timely that the Government is addressing this national issue now.”
The majority of the reform measures are expected to take effect from 1 July 2013, with the low income rebate commencing from 1 July 2012.
The superannuation industry also welcomed the passage of the mining tax bills package.
The mining tax will support the increase in the SG to 12 per cent, as well as a low-income earners super tax rebate.
The Association of Superannuation Funds of Australia (ASFA) has been advocating an increase in compulsory contributions for the past decade.
“This is a significant step forward in ensuring working Australians can retire with dignity,” said ASFA CEO, Pauline Vamos.
“It is imperative the Senate now follows the lead of the House of Representatives and passes this legislation.”
ASFA acknowledged the interest of the Greens in the distribution of super tax concessions.
In a statement, it pointed out that existing modeling on the equity of tax concessions on super was based on data from 2005-06 – before the caps on super contributions were introduced.
It also contends that the models do not take into account the new low-income earners rebate.
ASFA is working on a detailed, up-to-date analysis on the equity of tax concessions in superannuation to “ensure that policy makers are able to make an informed decision in the Senate next year”.
“This reform is good for the economy, affordable, equitable and necessary,” said Vamos.
“Today there are five working people to support each Australian aged 65; by 2050, this is projected to drop to 2.7 [people]. An increase in the SG will take the pressure off the Age Pension and assist more working Australians to a better quality of life in retirement.
“Boosting superannuation also boosts the Australian economy, increasing the nation’s GDP, creating jobs and providing much-needed private and public infrastructure investment.”
The Association of Financial Advisers (AFA) congratulated Minister for Financial Services and Superannuation, Bill Shorten, for taking the first step towards ensuring a better standard of living in retirement.
“Minister Shorten has identified what the financial advice community has been highlighting for years – that while currently only three million people in Australia are over the age of 65, by 2050 the number will have more than doubled to around eight million,” said AFA CEO Richard Klipin.
“That represents a population top-heavy with people who have retired from the workforce, which will put a huge tax burden on the country.”
