The administration of Anthony Albanese is planning a major overhaul of superannuation, giving every Australian a far larger nest egg when they retire.
Labor wants to increase employer-mandated payments from 10% to 15%, giving a $90,000-a-year worker an extra $174,016 when they retire.
Under Scott Morrison’s Coalition government, it was raised to 12% by 2025, although Labor ran on a promise to raise it even higher.
Last year, Financial Services Minister Stephen Jones told the Daily Mail Australia, “We’re focusing on 12 but the longer-term target is 12 to 15.”
Mr Jones confirmed on Wednesday that the government would increase the superannuation rate to 15%.
However, he stated that the timing and manner in which that milestone was reached would need to be studied in the coming years.
Mr Jones told the Australian Financial Review, “We’ll look at the pathways beyond 12 percent towards the tail of this term, but there are no current plans for that.”
Mr Jones stated that he wants to “bed in what we’ve got in place” and “look at the conditions as we near the conclusion of this term for where we could go for some of the more ambitious things.”
For a worker earning $50,000, raising super to 15% would increase monthly compulsory payments from $437 to $625, providing them more than $100,000 in their account by retirement in 42 years.
Monthly contributions for persons earning $150,000 would grow from $1,312 to $1,875 per month, raising their nest eggs from $1,170,333 to $1,496,613.
‘It’s obvious that the super guarantee increase keeps Australians on pace to have the dignified retirements they deserve,’ said Glen McCrea, deputy chief executive and chief policy officer of the Association of Superannuation Funds of Australia.
Labor is also considering requiring companies to pay super contributions at the same time as the employee is paid.
Many businesses pay super on a quarterly basis to better manage cash flow, but Mr Jones claims that this has resulted in $4 to $6 billion in unpaid super each year.
Industry Super Australia said that making companies pay it immediately would make it easier for them to keep track of it and prevent it from becoming underpaid if the company went bankrupt.
However, not everyone supports the proposal, with business groups and some economists saying that the additional cost to employers will restrict wage increases and cripple the economy.
Workers will wind up paying for most, if not all, of the superannuation rise in lower earnings, according to the Grattan Institute.
‘Our research reveals that within 2-3 years, decreased salaries account for 80% of the cost of super.’ Brendan Coates noted, “And the long-term impact could be as high as 100%.”
‘Forcing the entire workforce to save more for retirement by expanding compulsory super is not the solution to prevent older Australians from being impoverished in later life.’
Small and medium firms’ ability to afford increasing superannuation contributions has also been a source of concern for the business lobby.
Since mid-2013, however, Australian salaries have been below the long-term average of 3%.
While pre-Covid population expansion encouraged economic activity, Mr Jones claimed there was a correlation between low wage growth and increased immigration of 200,000 people per year from 2012 until the start of the pandemic in 2020.
‘It’s very evident that, while immigration has boosted overall GDP, it has stifled earnings, especially in some occupations,’ he said.
‘Rather of needing to pay local workers more to attract or retain them, they’ve relied on a pool of workers from overseas to meet their labor needs, either temporarily or permanently.’
Australians who were fortunate enough to receive a wage boost from July 1 last year were eligible to deposit up to $27,500 per year into their retirement savings, up from $25,000, and only pay 15% tax.
For most workers earning between $45,001 and $120,000 per year, this is half of the usual marginal tax rate of 32.5 percent.