Superannuation – Government Must Do’s

Here is just 2 simple things the Government should do to really help people save and invest.  
I could raise the issue of overall tax reform – which has gone missing in this Parliament – but I will focus on some smaller nitty gritty issues that a Labor Government should have addressed by now. After 5 years in power.

1. Mandatory Salary Sacrificing.
Quite a minority but a siginificant proportion of the population do not have access to the salary sacrifice option with their employer. It is an option that an employer can elect to do for employees – if they feel like it.  (In the 21st Century .. “if they feel like it”)

They can in fact cancell the Superannuation Guarantee payment if the employee salary sacrifices at all. That’s not very 21st Century – sounds more like 19th.

The government by now should have mandated that if an employee wants to salary sacrifice then the employer must acceed to the employee needs and self determined decisions.

The fact that a Labor government has not done so is a disgrace, and makes you think about their own pensions and super that are dished up at tax payers expense but someone on middle income may not be able to access a common legal option because the employer doesn’t feel like it. Where are the Unions when you need them? Arguing over their rights to misuse funds?

I have 2 clients where the employer said they would allow salary sacrifice and then changed their mind after a plan was implemented.  That the employer can do so, and in one case put the client at a financial disadvantage is unacceptable in this day and age. 

2. Averaging of Deductible Contributions.
The Government seems to be hell bent of preventing even lower-middle income people from developing a reasonable retirement fund through Superannuation and salary sacrifice.  Remember that compulsory Superannuation Gurantee only became 9% in the early 1990′s.

The maximum amount somone may claim as a contribution into Superannuation is now $25,000 for the next 2 years (2013 – 2014) – regardless of age.

So those with lower balances cannot now catch up once they are over 50 years of age.

Mind you this piece of legislation does not affect certain public service roles, those on defined benefit super /  pensions or various politicians. Funny that.

If the Government really wanted to help the lower middle class they would allow one off major deductible contributions in some years, but require that over 3-4 years the total be capped at a reasonable level. (This might satisfy those who dislike assisting the “well off”)

The previous Government had already averaged after tax contrbutions of either $150,000 p.a or $450,000 over 3 years.  So, why not the same principal on deductble contributions.  Hmmm ? It’s not that hard.  

  • Say, $25,000 p.a. or $75,000 over 3 years
  • Better yet $50,000 each year or $150,000 over 3 years.  So in a particularly good year an individual can salary sacrifice to their hearts content and other years get by on just the minumum Super Guarantee. 
  • Assuming their employer will let them salary sacrifice of course.

 Write to your local member.