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Superannuation Guarantee (Administration) Amendment Bill 2011



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ISSN 1328-8091

Parliament of Australia Departmentof Parliamentary Services

Contents

Purpose .................................................................................................................................................... 3

Background .............................................................................................................................................. 4

Other proposed superannuation changes .......................................................................................... 5

Summary of Superannuation Guarantee requirements ..................................................................... 5

History of the Superannuation Guarantee ......................................................................................... 7

Economic impact of the Superannuation Guarantee ....................................................................... 10

Superannuation industry overview .................................................................................................. 12

Basis of policy commitment .............................................................................................................. 16

Committee consideration ................................................................................................................. 17

Policy position of non-government parties/independents .............................................................. 17

Position of major interest groups ..................................................................................................... 19

Industry groups ............................................................................................................................ 19

Business groups ........................................................................................................................... 20

Other groups ................................................................................................................................ 21

Financial implications ............................................................................................................................. 21

Main issues............................................................................................................................................. 24

Adequacy of retirement incomes ..................................................................................................... 24

Budgeting approach ..................................................................................................................... 25

Replacement rate ........................................................................................................................ 25

Impact of increasing the Superannuation Guarantee rate from 9 per cent to 12 per cent on retirement incomes, on superannuation balances and income .................................. 26

BILLS DIGEST NO. 77, 2011-12 18 November 2011

Superannuation Guarantee (Administration) Amendment Bill 2011

Kai Swoboda Economics Section

Labour market and other economic impacts ................................................................................... 28

Alternative proposals to lift retirement incomes ............................................................................. 30

Henry Tax Review superannuation proposals ............................................................................. 31

Key provisions ........................................................................................................................................ 34

Schedule 1-Superannuation Guarantee age and percentage........................................................... 34

Conclusion .............................................................................................................................................. 35

Figures

Figure 1 Changes in the Superannuation Guarantee contribution rate, 1992-2011 .......................... 8

Figure 2 Trends in selected economic measures, 1987-88 to 2005-06 ........................................... 11

Figure 3 Superannuation assets as a share of GDP, 1988 to 2011 .................................................... 13

Figure 4 Superannuation contributions, by type, 2004 to 2010 ........................................................ 14

Figure 5 Superannuation fund assets and membership, by type of fund, 2004 to 2010 .................. 15

Tables

Table 1 Selected superannuation tax expenditures, 2006-07 to 2013-14 ...................................... 23

Table 2 Financial implications of measures proposed by the Superannuation Guarantee (Administration) Amendment Bill 2011 .............................................................................................. 23

Table 3 Effect of increasing Superannuation Guarantee rate on replacement rates ...................... 28

Table 4 Key retirement income policy recommendations of the Henry Tax Review ....................... 32

Table 5 Schedule of increases in Superannuation Guarantee charges, 1 July 2013 to 1 July 2019 ..................................................................................................................................................... 34

Superannuation Guarantee (Administration) Amendment Bill 2011 3

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Superannuation Guarantee (Administration) Amendment Bill 2011

Date introduced: 2 November 2011

House: House of Representatives

Portfolio: Treasury

Commencement: Sections 1 to 3 commence on Royal Assent, Schedule 1 commences on 1 July 2013 only if the four Bills that comprise the Minerals Resource Rent Tax Bills have commenced before 1 July 2013.1

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill's home page, or through http://www.aph.gov.au/Parliamentary_Business/Bills_Legislation. When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website at http://www.comlaw.gov.au/.

Purpose

As introduced, the Bill proposes to amend the Superannuation Guarantee (Administration) Act 1992 to provide for:

 an increase in the age of an employee at which the Superannuation Guarantee (a mandatory employer contribution to an employee’s superannuation fund that is a fixed percentage of the employee’s ordinary time earnings) no longer needs to be provided from 70 to 75, and

 an increase in the rate of employer contributions from the current rate of 9 per cent to 9.25 per cent in 2013-14, and then incremental increases in each subsequent year to 12 per cent in 2019-20.

The implementation of the changes proposed by this Bill are dependent on the passage of the Minerals Resource Rent Tax Bills, with the provisions not coming into effect unless the four Bills that relate to the proposed Minerals Resource Rent Tax have commenced before 1 July 2013.

On introduction of the Bill, the Minister for Financial Services and Superannuation indicated that the Government intended to abolish the maximum age limit for which Superannuation Guarantee contributions were required.2 This would be provided for in Government amendments to the Bill.3

1. The four Minerals Resource Rent Tax Bills are the Minerals Resource Rent Tax Bill 2011, the Minerals Resource Rent Tax (Imposition-Customs) Bill 2011, the Minerals Resource Rent Tax (Imposition-Excise) Bill 2011 and the Minerals Resource Rent Tax (Imposition-General) Bill 2011.

2. B Shorten (Assistant Treasurer and Minister for Financial Services and Superannuation), ‘Second reading speech: Superannuation Guarantee (Administration) Amendment Bill 2011’, House of Representatives, Debates, 3 November 2011, p. 6, viewed 9 November 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansardr%2F3641b58 3-a42e-4045-9472-07db51574a42%2F0016%22

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Background

Superannuation is part of the ‘three pillar’ arrangements that support retirement incomes in Australia.4 The Henry Tax Review noted that:

The three-pillar structure of the Australian retirement income system — the Age Pension, compulsory saving through the superannuation guarantee and voluntary superannuation saving — is unusual among developed countries, but it has considerable strengths. In particular, it provides a system intended to satisfy the minimum needs of all Australians, provides the capacity for individuals to enhance their retirement income, and spreads risks between the public and private sectors in a fiscally responsible way.5

Superannuation savings has existed for more than a century in Australia, with salaried public servants and employees of major banks, amongst others, covered by superannuation schemes.6 Superannuation became more widespread in the 1980s with the introduction of award-based superannuation, a move that increased superannuation coverage from around 40 per cent of employees in 1986 to 79 per cent in 1991.7

The rationale for a system of compulsory savings is based on theories of economic behaviour that, in leaving individuals to choose between consuming today and a risk-adjusted cost of postponing for future consumption, there is a risk that people will behave in a way that leaves them without sufficient savings for their own needs later in life, necessitating subsidisation by the state (at

3. B Shorten (Assistant Treasurer and Minister for Financial Services and Superannuation), ‘Personal explanations’, House of Representatives, Debates, 3 November 2011, p. 59, viewed 9 November 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansardr%2Fa6b442d 6-b362-4a91-a23b-e91e67a55e5c%2F0130%22

4. Australian Government, ‘Australia’s future tax system, the retirement income system: report on strategic issues’, Treasury website, May 2009, p. 8, viewed 13 November 2011, http://taxreview.treasury.gov.au/content/downloads/retirement_income_report_stategic_issues/retirement_incom e_report_20090515.pdf. The Minister for Financial Services and Superannuation recently considered that there are four pillars that ‘assure a quality of Australian life for all our fellow citizens: the minimum wage; the age pension; Medicare; and compulsory superannuation’ and that the recently announced National Disability Insurance Scheme has the potential to be the new fifth pillar, B Shorten (Minister for Financial Services and Superannuation), ‘Second reading speech: Superannuation Guarantee (Administration) Amendment Bill 2011’, House of Representatives, Debates, 2 November 2011, p. 6, viewed 11 November 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansardr%2F3641b58 3-a42e-4045-9472-07db51574a42%2F0016%22).

5. Australian Government, ‘Australia’s future tax system, the retirement income system: report on strategic issues’, Treasury website, May 2009, p. 8, viewed 13 November 2011, http://taxreview.treasury.gov.au/content/downloads/retirement_income_report_stategic_issues/retirement_incom e_report_20090515.pdf

6. Treasury, ‘Towards higher retirement incomes for Australians: a history of the Australian retirement income system since Federation’, Roundup, May 2001, p. 74, viewed 12 November 2011, http://www.treasury.gov.au/documents/110/PDF/round4.pdf

7. Australian Prudential Regulation Authority, ‘A recent history of superannuation in Australia’, APRA Insight, issue 2, 2007, p. 3, viewed 9 November 2011, http://www.apra.gov.au/Insight/Documents/History-of-superannuation.pdf

Superannuation Guarantee (Administration) Amendment Bill 2011 5

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taxpayers’ expense).8 For governments, mandatory savings schemes are also a mechanism to shift reliance on future tax-payer funded pensions to private savings.9

Other proposed superannuation changes

The proposal to increase the Superannuation Guarantee contribution rate and raise the maximum age for contributions is one of several superannuation-related Bills currently before the Parliament. The others include:

 Tax Laws Amendment (2011 Measures No. 8) Bill 2011—proposes to strengthen directors’ obligations to comply with existing pay as you go withholding and Superannuation Guarantee requirements

 Superannuation Legislation Amendment (MySuper Core Provisions) Bill 2011—proposes to introduce a simple, low-cost default superannuation product, and  Tax Laws Amendment (Stronger, Fairer, Simpler and Other Measures) Bill 2011—proposes to introduce a low income government superannuation contribution.

Separate Bills Digests for each of these Bills will be available from the Bill's home page10 when completed.

Summary of Superannuation Guarantee requirements

Under the Superannuation Guarantee (Administration) Act 1992 (SG Act), employers are required to contribute a minimum percentage (the ‘charge percentage’) of an employee’s ordinary earnings.

The Superannuation Guarantee scheme requires all employers to provide a minimum of 9 per cent superannuation support in each financial year for employees (with limited exceptions).11 From 1 July 2008, employers may only calculate the Superannuation Guarantee contributions with

8. P Agulnik, ‘Maintaining incomes after work: do compulsory earnings-related pensions make sense?’, Oxford Review of Economic Policy, vol. 16, no. 1, pp. 47-48, viewed 12 November 2011, http://oxrep.oxfordjournals.org/content/16/1/45.full.pdf;

9. M Hamilton and C Hamilton, ‘Baby boomers and retirement dreams, fears and anxieties’, Discussion paper, The Australia Institute, no. 89, September 2006, p. 10, viewed 15 November 2011, http://www.tai.org.au/documents/dp_fulltext/DP89.pdf

10. Tax Laws Amendment (2011 Measures No. 8) Bill 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fbillhome%2Fr4691% 22; Superannuation Legislation Amendment (MySuper Core Provisions) Bill 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fbillhome%2Fr4708% 22; Tax Laws Amendment (Stronger, Fairer, Simpler and Other Measures) Bill 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fbillhome%2Fr4709% 22

11. Superannuation Guarantee (Administration) Act 1992, section 19.

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reference to an employee’s ordinary time earnings.12 The ordinary time earnings of an employee is the lesser of:

 the total of the employee's earnings in respect of ordinary hours of work and earnings consisting of over‐award payments, shift loading and commission; but not including lump sum payments made on termination of employment in lieu of unused annual leave, long service leave or sick leave (in respect of the latter two terms within the meaning of the Income Tax Assessment Act 1997), or

 the maximum contribution base for the contribution period.13

On 13 May 2009 the ATO released a Superannuation Guarantee ruling that clarifies the meaning of ‘ordinary time earnings’.14 Under the ruling the concept of ‘ordinary time earnings’ would also include (amongst other payments):

 over award payments, where such payments were part of the employee’s ordinary hours of work (that is worked on a regular basis)  shift loadings, in relation to the person’s ordinary hours of work  commissions  allowances and loading in respect of a person’s ordinary hours of work, such as site allowances,

casual loading allowance, dirt allowances or a freezer allowance, but only in relation to the person’s ordinary hours of work  bonuses, in most cases  piece rates  paid leave  payments in lieu of notice  some workers compensation payments, and  directors’ fees.

However, certain payments are not included in a person’s ordinary time earnings for Superannuation Guarantee purposes. Amongst these payments are:

 overtime payments, and  allowances which constitute a reimbursement of expenses.

A key exemption from payments is where the employee is paid less than $450 per month in salary/wages.15 Other exemptions, and a range of arrangements imposed on employers regarding

12. Superannuation Guarantee (Administration) Act 1992, subsections 23(2)—23(5). 13. Superannuation Guarantee (Administration) Act 1992, subsection 6(1). 14. Australian Taxation Office (ATO), ‘Superannuation Guarantee Ruling SGR 2009/2 - Superannuation Guarantee: meaning of the terms “ordinary time earnings” and “salary or wages”’, Original Ruling, Canberra, 13 May 2009, ATO

website, viewed 13 November 2011, http://law.ato.gov.au/atolaw/view.htm?docid=SGR/SGR20092/NAT/ATO/00001 15. Superannuation Guarantee (Administration) Act 1992, section 27(2). Had the $450 threshold been indexed to the consumer price index the threshold would have been around $736 in June 2011 (Parliamentary Library estimates

Superannuation Guarantee (Administration) Amendment Bill 2011 7

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the payment of Superannuation Guarantee amounts, including the timing of payments and the fund into which the payment is made are summarised in a separate Parliamentary Library publication.16

History of the Superannuation Guarantee

The Superannuation Guarantee was announced by the then Treasurer as part of the 1991-92 Budget speech. The Treasurer noted that:

Over the past eight years, major progress has been made in extending the superannuation system in Australia. In 1986, 3 per cent superannuation was awarded by the then Conciliation and Arbitration Commission as part of a productivity and wage package. This award requirement has not been complied with in full.

The Government will therefore introduce a superannuation guarantee levy, starting from July next year [1992].

... This new superannuation guarantee levy will underpin the Government's retirement incomes policy. Superannuation will be extended to many Australians for the first time. In addition, an efficient mechanism for the orderly increase in the level of superannuation support over time will be put in place.

17

Legislation to introduce the Superannuation Guarantee was introduced in the Parliament in April 1992.18 After considerable debate, including government amendments in the Senate19 and an error being made in the return of the Bill to the House of Representatives20, the Bills passed the Parliament and were given Royal Assent in August 1992.21

based on June quarter CPI index published by the ABS compiled by the Parliamentary Library, Table 2.4, 2.4 Consumer price index, viewed 12 November 2011, http://libiis1/Library_Services/Quicklinks/msb_edata/index.htm 16. L Nielson, Superannuation 2010-2011, Research paper, no. 3, 2010-11, Parliamentary Library, Canberra, 9 September 2010, viewed 18 November 2011,

http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22library%2Fprspub%2F200004%22 17. J Kerin (Treasurer), ‘Second reading speech: Appropriation Bill (No. 1) 1991-92’, House of Representatives, Debates, 20 August 1991, p. 13, viewed 9 November 2011,

http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansardr%2F1991-08-20%2F0024%22 18. Australia, House of Representatives, Votes and proceedings, no. 120, 2 April 1992, p. 1424, viewed 9 November 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fvotes%2F1992-04-

02%2F0028%22 19. Australia, Senate, Journals, no. 178, 24 June 1992, viewed 9 November 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fjournals%2F1992-06-

24%2F0008%22 20. H Jenkins, ‘Statement by the Speaker’, House of Representatives, Debates, viewed 9 November 2011, pp. 1364-1365, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fvotes%2F1992-08-

18%2F0013%22 21. Australia, Senate, Journals, no. 183, 8 September 1992, pp. 1364-1365, viewed 13 November 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fvotes%2F1992-08-

18%2F0013%22

8 Superannuation Guarantee (Administration) Amendment Bill 2011

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There have been a range of changes and proposed changes to the Superannuation Guarantee, including administration arrangements, since its introduction. Over the period 1992-02 the Superannuation Guarantee charge rate increased according to the timetable established in 1992, increasing incrementally from 3 per cent in July 1992 to 9 per cent in July 2020 (see Figure 1).

Figure 1 Changes in the Superannuation Guarantee contribution rate, 1992-2011

Source: Superannuation Guarantee (Administration) Act 1992, former sections 20 and 21.

In the 1995-96 Budget, the then Treasurer outlined the Keating Government’s proposal to further increase superannuation contributions to 15 per cent.22 This was to be achieved through both an employee and employer contribution:

 government support for the inclusion in all awards of provisions for employee superannuation contributions beginning at 1 per cent of earnings in July 1997 and rising to 3 per cent of earnings by July 1999, and

 a government contribution that matches dollar for dollar the contributions paid by most employees into their superannuation accounts.23

22. R Willis (Treasurer), ‘Second reading: Appropriation Bill (No. 1) 1995-96, House of Representatives, Debates, 9 May 1995, p. 68, viewed 9 November 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansardr%2F1995-05-09%2F0079%22

23. Ibid.

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Employers with base year payroll of $1 million or less Employers with base year payroll of more than $1 million

Superannuation Guarantee (Administration) Amendment Bill 2011 9

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On the election of the Coalition Government in 1996, the then Treasurer announced that the former Government’s 1995-96 Budget proposals for employee and government contributions would be reviewed and that the schedule of employer Superannuation Guarantee contributions would remain unchanged.24 The Coalition Government proposed that employees be able to ‘opt out’ by having the opportunity to receive wages or salary instead of Superannuation Guarantee contributions.25 This was to commence on 1 July 1998 but was later deferred and then dropped.26

In 1997 the Government increased the maximum contribution age from 65 to 70 and introduced Retirement Savings Accounts into which Superannuation Guarantee amounts can be paid.27

In 2002 the maximum age for employee superannuation contributions increased from 70 to 75 (for people working at least 10 hours a week) and in 2003 requirements were introduced for employers to pay Superannuation Guarantee payments on a quarterly basis.28

In 2005, after the introduction of several proposals over a number of years, legislation came into effect to provide for employees to choose which fund their employer’s superannuation contributions are paid.29

In 2008 an expanded definition of ‘ordinary time earnings’ for Superannuation Guarantee purposes was implemented by the Government.30

In 2011, a private Member’s Bill was introduced to remove the maximum age limit for Superannuation Guarantee contributions.31 The Speaker ruled that the Bill could not proceed in its

24. P Costello (Treasurer), ‘Second reading speech: Appropriation Bill (No. 1) 1996-97’, House of Representatives, Debates, 20 August 1996, p. 3269, viewed 9 November 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansardr%2F1996-08-20%2F0070%22

25. P Costello (Treasurer), ‘Second reading: Appropriation Bill (No. 1) 1996-97’, House of Representatives, Debates, 20 August 1996, p. 3269, viewed 11 November 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansardr%2F1996-08-20%2F0070%22

26. CCH Australia Limited, Australian Master Superannuation Guide, 2000-01, 5 th edn., p. 451 and Australian Master

Superannuation Guide, 2001-02, 6 th edn., p. 428.

27. Retirement Savings Account 1997; Taxation Laws Amendment Act (No. 3) 1997. 28. Taxation Laws Amendment (Superannuation) Act (No. 2) 2002. 29. Superannuation Legislation Amendment (Choice of Superannuation Funds) Act 2004. 30. ATO, ‘Ordinary time earnings’ are to include over award payments, shift loadings, allowances and piece rates paid in

relation to a person’s ordinary hours of work. It does not include overtime payments. Introduced by the Superannuation Laws Amendment (2004 Measures No. 2) Act 2004 and applied by the Australia Taxation Office according to Superannuation Guarantee Ruling 2009/2, http://law.ato.gov.au/atolaw/view.htm?docid=SGR/SGR20092/NAT/ATO/00001 31. R Webb, Abolition of Age Limit on Payment of the Superannuation Guarantee Charge Bill 2011, Bills Digest, no. 85,

2010-11, Parliamentary Library, Canberra, 2011, viewed 11 November 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fbillsdgs%2F740425% 22

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current form because, as a Private Member’s Bill, it breached the provisions of standing orders that relate to the introduction of proposals for appropriation and taxation.32

Economic impact of the Superannuation Guarantee

Discussions about the impact on the economy of the imposition of the Superannuation Guarantee over the period 1992 to 2002 include reference to changes in unit labour costs, employment, real wages and profit share. Arguments that the imposition of the Superannuation Guarantee and increase in the rate during the 1990s had little effect on employers and employment point to a fall in the unit labour costs and upward shift in profit share over the period that the Superannuation Guarantee was implemented.33

The trend in several labour-related economics measures over the period of implementation of the Superannuation Guarantee is shown in Figure 2. It is important to note that these measures will be influenced by a range of factors, including the level and changes in overall economic activity. In general terms, over the period 1987-88 to 2005-06:

 real unit labour costs declined in each consecutive year except in 1995-95 and 1996-97, years when the Superannuation Guarantee increased consecutively by 1 percentage point  real wages increased in each consecutive year except for a decline in 1999-00, a year when the Superannuation Guarantee was unchanged, and  employment increased in each consecutive year.

32. Australia, House of Representatives, Votes and proceedings, no. 45, 2 June 2011, p. 597, viewed 16 November 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fvotes%2F2011-06-02%2F0030%22

33. See for example, B Shorten (Minister for Financial Services and Superannuation), ‘Second reading speech: Superannuation Guarantee (Administration) Amendment Bill 2011’, House of Representatives, Debates, 2 November 2011, p. 6, viewed 11 November 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansardr%2F3641b58 3-a42e-4045-9472-07db51574a42%2F0016%22

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Figure 2 Trends in selected economic measures, 1987-88 to 2005-06

Real wages, employment and real unit labour costs (index)

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Real wages Employment Real unit labour costs

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Profit share of income

Note: Index base year is 2002-03 for all series. Sources: Australian Bureau of Statistics data compiled by the Parliamentary Library for the ‘Monthly statistical bulletin e-data’, Table 1.1 (employment), Table 2.1 (average weekly ordinary time earnings), Table 2.3 (wage price index), and Table 3.3 (wages and profit share), viewed 11 November 2011, http://libiis1/Library_Services/Quicklinks/msb_edata/index.htm; Australian Bureau of Statistics, ‘Australian system of National accounts-2010-11’, ABS Cat, no. 5204, Table 72, Unit Labour costs, viewed 13 November 2011, http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/5204.02010-11?OpenDocument

Superannuation industry overview

The superannuation industry has benefited significantly from the introduction of the Superannuation Guarantee in 1992. At the end of 2010, total superannuation assets, arising from compulsory and voluntary contributions as well as the earnings on investments within superannuation funds, were around $1.3 trillion.34 As a share of GDP, superannuation assets have grown from around 27 per cent in June 1988 to around 100 per cent in June 2011 (Figure 3).

34. Australian Prudential Regulation Authority (ARPA), ‘Annual superannuation bulletin’, June 2010, p. 21, viewed 13 November 2011, http://www.apra.gov.au/Statistics/Documents/June-2010-Annual-Superannuation-Bulletin.pdf

50

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1987-88 1989-90 1991-92 1993-94 1995-96 1997-98 1999-00 2001-02 2003-04 2005-06

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Superannuation Guarantee (Administration) Amendment Bill 2011 13

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Figure 3 Superannuation assets as a share of GDP, 1988 to 2011

Source: D Gruen and L Soding, ‘Compulsory superannuation and national saving’, Treasury website, Paper presented at the 2011 Economic and Social Outlook Conference, 1 July 2011, viewed 13 November 2011, http://www.treasury.gov.au/documents/2078/PDF/CompulsorySuperannuationandNationalSaving.pdf

Employers’ contributions on behalf of employees (which include payments under the Superannuation Guarantee) have continued to grow and have generally exceeded payments made by employees in most years since 2004 (Figure 4).

0%

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Jun-1988 Jun-1990 Jun-1992 Jun-1994 Jun-1996 Jun-1998 Jun-2000 Jun-2002 Jun-2004 Jun-2006 Jun-2008 Jun-2010

Share of GDP

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Figure 4 Superannuation contributions, by type, 2004 to 2010

Source: Australian Prudential Regulation Authority (ARPA), ‘Annual superannuation bulletin’, June 2010, p. 21, viewed 13 November 2011, http://www.apra.gov.au/Statistics/Documents/June-2010-Annual-Superannuation-Bulletin.pdf

Almost all sectors of the superannuation industry have experienced growth in both the number of Members and assets under management (Figure 5). In recent years, ‘small’ superannuation funds-predominantly Self Managed Superannuation Funds (SMSFs)—have increased significantly in both the number of funds and assets under management, with the number of SMSFs expanding from 200 000 in 2000 to 410 000 in 2009 and the value of assets under management rising from $69 million to $332 million over the same period.35

35. Australian Government, ‘Review into the governance, efficiency, structure and operation of Australia’s superannuation system: a statistical summary of self‐managed superannuation funds’, Super System Review website, 10 December 2009, p. 22, viewed 13 November 2011, http://www.supersystemreview.gov.au/content/downloads/statistical_summary_smsf/SMSF_statistical_summary_r eport.pdf

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Superannuation Guarantee (Administration) Amendment Bill 2011 15

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Figure 5 Superannuation fund assets and membership, by type of fund, 2004 to 2010

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Members

Source: Australian Prudential Regulation Authority (ARPA), ‘Annual superannuation bulletin’, June 2010, p. 21, viewed 13 November 2011, http://www.apra.gov.au/Statistics/Documents/June-2010-Annual-Superannuation-Bulletin.pdf

Basis of policy commitment

The 2007 ALP National Platform considered that the level of the Superannuation Guarantee was inadequate and that a rise to a 15 per cent contribution level was a target:

Labor notes the clear evidence that the 9 per cent [superannuation guarantee] is insufficient to fund adequate retirement incomes for workers on average incomes. Labor believes that employers, employees and government will need to make a contribution to addressing this, and Labor will work over time to achieve a 15 per cent contribution level.

36

In the lead up to the 2007 election, the ALP confirmed that its policy was to retain the Superannuation Guarantee rate of 9 per cent.37

The Government first announced the proposal to increase the Superannuation Guarantee rate from 9 per cent to 12 per cent and to lift the age at which a contribution no longer needs to be provided

36. Australian Labor Party, National platform and constitution 2007, p. 110, viewed 13 November 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22library%2Fpartypol%2F1024541%2 2

37. N Sherry and W Swan, Report on superannuation incorrect, media statement, 5 November 2007, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2F89UO6%22

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

18 000

Jan 2003 Jan 2004 Jan 2005 Jan 2006 Jan 2007 Jan 2008 Jan 2009 Jan 2010

Number of member accounts ('000)

Corporate Industry Public Sector Retail Small

Superannuation Guarantee (Administration) Amendment Bill 2011 17

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from 70 to 75 on 2 May 2010 as part of the Government’s response to the Henry Tax Review.38 On announcement, the Government indicated that the cost of these measures would be met by the implementation of a Resource Rent Tax.39

In the lead up to the 2010 election the ALP advocated a number of superannuation policies that had been announced in the 2010-11 Budget, including an increase in the Superannuation Guarantee rate from 9 per cent to 12 per cent and raising the age limit from 70 to 75.40

Committee consideration

The Bill has been referred to the House of Representatives Standing Committee on Economics for inquiry and report by 21 November 2011 as part of the Minerals Resource Rent Tax package of Bills. Details of the inquiry are at: http://www.aph.gov.au/Parliamentary_Business/Committees/House_of_Representatives_Committe es?url=economics/mineralstax/index.htm.41

The Bill has also been referred to the Senate Economics Committee for inquiry and report by 14 March 2012 as part of the Minerals Resource Rent Tax package of Bills. Details of the inquiry are at: http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=economics_c tte/MRRT_Bill_2011/index.htm.42

Policy position of non-government parties/independents

The policy position of the Australian Greens and independent Members of the House of Representatives on superannuation issues may be less relevant than their position on the Minerals Resource Rent Tax Bills, on which this measure depends.

38. W Swan (Treasurer) and C Bowen (Minister for Financial Services, Superannuation and Corporate Law), Stronger, fairer, simpler superannuation: banking the benefits of the boom, media release, no. 027, 2 May 2010, viewed 7 November 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2FX5LW6%22

39. K Rudd (Prime Minister) and W Swan (Treasurer), Stronger, Fairer, Simpler: a tax plan for our future, media release, no. 028, 2 May 2010, viewed 7 November 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2FKSQW6%22

40. Australian Labor Party, ‘Equality for women’, 2010 election policy document, viewed 13 November 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22library%2Fpartypol%2F165079%22; ‘Delivering for seniors’, 2010 election policy document, viewed 13 November 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22library%2Fpartypol%2FONKX6%22

41. House of Representatives Standing Committee on Economics, Inquiry into the Mineral Resource Rent Tax Bills 2011, 2 November 2011, viewed 16 November 2011, http://www.aph.gov.au/Parliamentary_Business/Committees/House_of_Representatives_Committees?url=economi cs/mineralstax/index.htm

42. Senate Economics Committee, Inquiry into the Minerals Resource Rent Tax Bill 2011 and related Bills, 10 November 2011, viewed 16 November 2011, http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=economics_ctte/MRRT_Bill_2 011/index.htm

18 Superannuation Guarantee (Administration) Amendment Bill 2011

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In the lead up to the 2010 election the Coalition campaigned for a removal of the maximum age limit.43 Other retirement incomes-related policies included:

 the Australian Office of Financial Management examine issuing bonds for terms of up to 30 years  a response to the Cooper Review by the end of the Coalition’s first term in government, with particular recognition that the SuperStream recommendation is ‘worthy of further consideration’ while noting that further industry discussion would be required before a decision

could be made on the MySuper recommendation, and  a response to Treasury modelling on the Henry Review’s recommendations relating to superannuation.44

The Coalition is recently reported to have committed to not reversing the increase in the Superannuation Guarantee from 9 per cent to 12 per cent should they form Government.45

The Australian Green’s superannuation-related policies for the 2010 election included policies to review the superannuation system with the aim of reducing its complexity and establishing progressive rates of superannuation taxation, improve indexation arrangements for public service and defence force superannuation schemes and retain art works and other collectibles as legitimate investments for self-managed superannuation funds.46

Of the independents in the House of Representatives, only Mr Oakeshott has expressed some support for increasing the Superannuation Guarantee rate.47 Mr Oakeshott and Mr Windsor were involved in lobbying the Minister for Financial Services to abolish the Superannuation Guarantee maximum age limit and so could be expected to support an amended Bill incorporating this.48

43. Liberal Party of Australia, ‘The Coalition’s real action plan to support seniors’, 2010 election policy document, viewed 13 November 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22library%2Fpartypol%2F3CNX6%22

44. Liberal Party of Australia, ‘The Coalition’s plan for real action on superannuation’, 2010 election policy document, viewed 13 November 2011, http://www.liberal.org.au/~/media/Files/Policies%20and%20Media/Community/Superannuation%20Policy.ashx

45. B Emery, ‘Coalition has change of heart on SG: Opposition commits to 12pc’, Investor Daily website, 16 November 2011, viewed 16 November 2011, http://www.investordaily.com/cps/rde/xchg/id/style/12916.htm?rdeCOQ=SID-0A3D9633-37ECB988

46. Australian Greens, ‘Australian Greens Policy: economics’, issued March 2010’, viewed 13 November 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22library%2Fpartypol%2FTQFX6%22; and ‘Policy initiatives 2010’, Greens website, viewed 13 November 2011, http://greens.org.au/content/policy-initiatives-2010

47. R Oakeshott, ‘Address to the National Press Club - 4 March 2011’, viewed 13 November 2011, http://www.rdamidnorthcoast.org.au/sites/default/files/news/2011_03_04_NPC_address.pdf 48. B Shorten (Minister for Financial Services and Superannuation), More money in retirement: an historic boost to superannuation, media release, no. 146, 2 November 2011, viewed 13 November 2011,

http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2F1200124%22

Superannuation Guarantee (Administration) Amendment Bill 2011 19

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Position of major interest groups

Industry groups

The Association of Superannuation Funds Australia (ASFA) supports the Superannuation Guarantee increase and the abolition of the maximum contribution age.49 ASFA consider that the extended period over which the increase is phased in will allow employers and employees to negotiate the increase as part of wage negotiations.50 According to recent research commissioned by ASFA, there are ‘very strong’ levels of community support for an increase in the Superannuation Guarantee rate from 9 to 12 per cent.51

The Australian Institute of Superannuation Trustees (AIST) consider that lifting the contribution rate to 12 per cent ‘will mean the difference between just getting by and enjoying retirement for millions of Australians’.52

The Self Managed Super Fund Professionals’ Association of Australia (SPAA) welcomed the Government’s announcement to remove the Superannuation Guarantee age limit and supports the proposed increase in the Superannuation Guarantee from 9 per cent to 12 per cent.53 The SPAA considers that there are a number of other superannuation contribution issues to address, such as raising the annual concessional superannuation caps and finding a resolution to the excess contributions tax problem ‘so confidence and certainty in the superannuation system can be restored’.54

The Industry Superannuation Network (ISN) support the increase in the Superannuation Guarantee from 9 per cent to 12 per cent as a ‘crucial improvement to Australia’s retirement savings system’.55

49. Association of Superannuation Funds Australia, Super legislation: an historic development for Australian workers, media release, 2 November 2011, viewed 11 November 2011, http://www.superannuation.asn.au/media-release-2-november-2011

50. Ibid.

51. Association of Superannuation Funds Australia, Australians want SG increase: new research, media release, 1 November 2011, viewed 11 November 2011, http://www.superannuation.asn.au/media-release-1-november-2011 52. Australian Institute of Superannuation Trustees (AIST), Historic day for super and the retirement outlook of all working Australians: AIST, media release, 2 November 2011, viewed 11 November 2011,

http://www.aist.asn.au/media/8148/2011%2011%2003_media_pollnewfinal.pdf 53. Self Managed Super Fund Professionals’ Association of Australia (SPAA), SPAA welcomes superannuation changes but urges the Government to do more to encourage contributions, media release, 3 November 2011, viewed

13 November 2011, http://www.spaa.asn.au/media/53172/11_11_03_spaa_welcomes_super_changes.pdf 54. Ibid.

55. Industry Superannuation Network (ISN), Boost to Superannuation Guarantee deserves Parliamentary support, media release, 2 November 2011, viewed 13 November 2011, http://www.industrysupernetwork.com/wp-content/uploads/2011/11/Boost-to-Super-Guarantee-deserves-Parliamentary-support.pdf

20 Superannuation Guarantee (Administration) Amendment Bill 2011

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Business groups

The Australian Chamber of Commerce and Industry (ACCI) opposed increasing the Superannuation Guarantee rate from 9 per cent to 12 per cent.56 The ACCI opposes the increase for a number of reasons including:

 trade unions have openly indicated that even in unionised workforces they are not prepared to trade off wages for a rise in superannuation to 12 per cent  the Cooper Review into superannuation found that retirement incomes can be increased by forcing efficiencies and lower fees on the superannuation industry  the Henry Tax Review recommendation against increasing the 9 per cent levy has been widely

welcomed by business, and  revised revenue forecasts from the proposed mining tax cast doubt on the capacity of the Commonwealth Budget to fund the higher tax concessions arising from the $20 billion in

increased employer contributions.57

The Australian Industry Group (AIG) consider that with the increased cost to business there should be a systematic trade-off to offset the Superannuation Guarantee (SG) increase.58 In AIG’s view, this would require Fair Work Australia to discount its minimum wage increases to reflect increases in the Superannuation Guarantee and for the Fair Work Act to be amended to require bargaining representatives to take into account Superannuation Guarantee increases that employers will be required to pay.59

The Council of Small Businesses of Australia (COSBOA) consider that small businesses should be removed from the process of collecting and distributing moneys paid on behalf of employees to superannuation funds.60

The Institute of Public Accountants (IPA) consider that the proposed increase in the Superannuation Guarantee will bolster retirement savings but that the administration burden on small business is an issue.61 The IPA recommends that small business should be able to choose to have superannuation

56. Australian Chamber of Commerce and Industry (ACCI), Submission in response to Superannuation Legislation Amendment (MySuper Core Provisions) Bill 2011, 57. Australian Chamber of Commerce and Industry (ACCI), Rise in payroll super unjustified, media release, 24 February 2011, viewed 11 November 2011, http://www.acci.asn.au/Research-and-Publications/Media-Centre/Media-

Releases-and-Transcripts/Economics-Industry/Rise-In-Payroll-Super-Unjustified?feed=ACCIResearch 58. Industry Update, ‘Industry calls for a review of company tax rate’, 8 July 2010, viewed 11 November 2011, http://www.industryupdate.com.au/focus-corner/article/271 59. Ibid.

60. Council of Small Business Associations of Australia (COSBOA), COSBOA Summit Communiqué 2011: NAB 2011 National Small Business Summit, COSBOA website, viewed 11 November 2011, http://www.cosboa.org/webs/cosboa/cosboa.nsf/d00f23e7f0175294ca25781300807f32/d2a4c8951fb046f3ca2578d 80076e022!OpenDocument

61. Institute of Public Accountants, Small business fraught by super increase, media release, 8 November 2011, viewed 12 November 2011, http://www.publicaccountants.org.au/library/media-releases/smallbusinesssuperincrease

Superannuation Guarantee (Administration) Amendment Bill 2011 21

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contributions paid directly to the Australian Taxation Office (ATO), at the same time as PAYG payments are made, with the ATO taking responsibility for ensuring the money goes to the right account.62

Other groups

The Australian Council of Trade Unions (ACTU) support the proposed increase in the Superannuation Guarantee. The ACTU considered that the change would benefit women workers, noting:

Women on lower incomes will be particularly better off. The changes will boost the superannuation of 2.1 million women earning less than $37,000 by $550 million in 2012-13 alone and deliver a 30 year old woman on average wages an extra $108,000 — or $2,900 each year of her retirement.

63

The Age Discrimination Commissioner considered that the announcement to remove the maximum age for Superannuation Guarantee contributions was ‘a significant achievement in the fight against age discrimination’.64 The Commissioner noted:

This decision means that in respect of superannuation, older workers - be they over 75 or over 80 - will have the same rights as all other employees ... They will have more super to retire on, the government will have a lower age pension bill, and productivity will grow as older workers are encouraged to continue in their jobs.

65

National Seniors welcomed the Government’s announcement to remove the Superannuation Guarantee age limit.66

Financial implications

The cost of increasing the Superannuation Guarantee rate and raising (or abolishing the maximum contribution age) involves a cost to the Government in several areas where taxes are applied including:

62. Australian Council of Trade Unions (ACTU), Superannuation increase means more Australians will be secure in retirement, media release, 2 November 2011, viewed 13 November 2011, http://www.actu.org.au/Media/Mediareleases/SuperannuationincreasemeansmoreAustralianswillbesecureinretirem ent.aspx

63. Ibid.

64. Human Rights and Equal Opportunity Commission, Removal of superannuation age cap to be applauded, media release, 2 November 2011, viewed 13 November 2011, http://www.hreoc.gov.au/about/media/media_releases/2011/97_11.html

65. Ibid.

66. National Seniors, Shorten scraps super age limit in a welcome win for seniors, media release, 2 November 2011, viewed 13 November 2011, http://www.nationalseniors.com.au/page/Driving_Change/News/Press_Releases/2011_Media_Releases/Super_age_ limit_win/

22 Superannuation Guarantee (Administration) Amendment Bill 2011

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 when contributions are made to a superannuation fund  when investments in superannuation funds earn income, and  when superannuation benefits are paid out.67

Treasury estimate, where possible, the cost of various tax concessions to the Budget and publish these on an annual basis.68 Estimates for the tax concessions for superannuation on employer contributions (taxed at 15 per cent) and earnings within the fund (taxed at 15 per cent) are calculated with reference to the relevant income tax rate that would have applied had the income been assessed against the individual’s marginal income tax rates.69 Estimates for the superannuation tax concession for the payment of benefits (no tax if over 60 and 15 per cent if paid to taxpayers aged 55 to 59 and to disability benefits paid to taxpayers of any age) are based on the benchmark that these payments are untaxed, as the tax component is already incorporated in the other calculations.70

Treasury estimate that the value of these superannuation tax concessions has grown significantly in recent years (Table 1).

67. Treasury, ‘Tax expenditures statement 2010’, January 2011, p. 207, viewed 13 November 2011, http://www.treasury.gov.au/documents/1950/PDF/2010_TES_consolidated.pdf 68. Estimates presented here are calculated on revenue foregone. Estimates based on the ‘revenue gained’ approach for superannuation are generally in the order of 20-40 per cent lower than using the revenue foregone approach,

Treasury, ‘Tax expenditures statement 2010’, January 2011, p. 198, viewed 13 November 2011, http://www.treasury.gov.au/documents/1950/PDF/2010_TES_consolidated.pdf 69. Ibid., pp. 120, 121 and 207. 70. Ibid., pp. 128 and 207.

Superannuation Guarantee (Administration) Amendment Bill 2011 23

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Table 1 Selected superannuation tax expenditures, 2006-07 to 2013-14

Concessional taxation of

employer contributions Concessional taxation of superannuation entity earnings

Tax on funded superannuation income streams

2006-07 $11 400m $12 900m *

2007-08 $13 150m $22 050m *

2008-09 $13 300m $16 300m *

2009-10 $14 100m $10 900m *

2010-11 $14 300m $12 200m *

2011-12 $15 800m $13 600m *

2012-13 $16 300m $15 200m *

2013-14 $17 900m $17 900m *

Note: * estimate is not available. Source: Treasury, ‘Tax expenditures statement 2010’, op. cit., pp. 120-122 and p. 128.

The Explanatory Memorandum notes that the cost of the measures proposed by the Bill is expected to be $740 million over the forward estimates to 2014-15 (Table 2).71 These estimates are the same for 2013-14 as presented in the 2010-11 Budget when these policies were first announced.72

Table 2 Financial implications of measures proposed by the Superannuation Guarantee (Administration) Amendment Bill 2011

2011-12 2012-13 2013-14 2014-15 Total

Increase in superannuation guarantee

Nil Nil -$240m -$500m -$740m

Raising the superannuation guarantee age limit from 70 to 75

Nil Nil $15m -$15m Nil

Total Nil Nil -$225m -$515m -$740m

Source: Explanatory Memorandum, pp. 3-4.

71. Explanatory Memorandum, p. 3-4. 72. Australian Government, Budget measures: budget paper no. 2, 2010-11, Commonwealth of Australia, Canberra 2010, p. 6.

24 Superannuation Guarantee (Administration) Amendment Bill 2011

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Main issues

Discussion about the merits of increasing the Superannuation Guarantee rate to 12 per cent and removing the maximum contribution age have included the likely additional benefits (and costs) of the approach on individuals and the labour market. Alternative proposals, such as that proposed by the recent Henry Tax Review, have also been raised.

While there is some debate about the merits of specific superannuation policies, such as equity considerations73 and cost effectiveness74 of the tax-free status of payments from superannuation funds once an individual achieves 60 years of age and is retired, these issues are beyond the scope of this paper.

Adequacy of retirement incomes

One of the key arguments made for the need to lift the Superannuation Guarantee rate is that on current projections, most retirees will not be able to sustain a comfortable lifestyle and that superannuation savings will run out too early.

A person’s retirement income can have several components, including a person’s superannuation benefits. Other components of a person’s retirement income are the age pension and/or the drawdown of their capital. This capital can include their superannuation balances, non-superannuation assets and even their own residence through a reverse mortgage.

There are links between these other components of an individual’s retirement income so that policies designed to address one component can affect the others. For example, it has been estimated that there is a reduction in private saving of 30 cents for every additional dollar added to superannuation through compulsory contributions.75

The latest estimates by the Australian Bureau of Statistics for 2009 are that households have an average balance of $89 100 in superannuation, with households in the lowest 20 per cent of incomes having an average balance of $30 100 and households in the top 20 per cent of incomes having an average balance of $200 400.76 Superannuation accounts for around 14 per cent of average

73. See for example, A Borowski, ‘Back at the crossroads: the slippery fish of Australian Retirement Income Policy’, Australian Journal of Social Issues, vol. 43, no. 2, Winter 2008, pp. 311-334, viewed 13 November 2011, http://search.informit.com.au/fullText;dn=191857426068716;res=IELHEA

74. See for example, D Ingles, ‘The great superannuation tax concession rort’, Research paper, no. 61, The Australia Institute website, February 2009, viewed 13 November 2011, https://www.tai.org.au/index.php?q=node%2F19&pubid=540&act=display

75. E Connolly, ‘The effect of the Australian superannuation guarantee on household saving behaviour’, Reserve Bank of Australia, Research discussion paper—2007-08, p. 17, viewed 12 November 2011, http://www.rba.gov.au/publications/rdp/2007/pdf/rdp2007-08.pdf

76. Australian Bureau of Statistics (ABS), ‘Household wealth and wealth distribution’, ABS Cat. no. 6554.0, 2009-10, Table 12, Gross Income quintiles, Household assets and liabilities, viewed 12 November 2011, http://www.ausstats.abs.gov.au/Ausstats/subscriber.nsf/0/51342DFD54324472CA257928001107B4/$File/65540_20 09-10.pdf

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household assets, with property assets accounting for the largest share of household assets at 60 per cent.77

Generally, the adequacy of retirement incomes is measured with reference to either:

 the income per year a person may need in retirement (the budgeting approach)78, or  the replacement rate.

Budgeting approach

A prominent example of the budgeting approach to measuring the adequacy of retirement income has been undertaken by the Association of Superannuation Funds of Australia (ASFA). This organisation has outlined two standards of retirement income:

 a modest but adequate standard of living in retirement that is better than the age pension but retirees will still only be able to afford fairly basic activities.79 The estimated cost of this lifestyle in the June quarter of 2011, for a couple, was $31 519 per annum80, and

 a comfortably affluent standard of living in retirement that enables ‘an older, healthy retiree to be involved in a broad range of leisure and recreational activities and to have a good standard of living through the purchase of such things as; household goods, private health insurance, a reasonable car, good clothes, a range of electronic equipment, and domestic and occasionally international holiday travel’.81 The estimated cost of this lifestyle, for a couple, was $54 954 per annum in the June quarter of 2011.82

Both these standards of living assume that the retirees own their own home.83

Replacement rate

The replacement rate is the ratio of a person’s income or spending power after retirement compared to the period just before retirement. This is usually expressed as a percentage of the retiree’s pre-retirement income. 84

77. Australian Bureau of Statistics (ABS), ‘Household wealth and wealth distribution’, 2009-10, ABS Cat. no. 6554.0, Table 9, Net worth quintiles, Composition of assets and liabilities, viewed 12 November 2011, http://www.ausstats.abs.gov.au/Ausstats/subscriber.nsf/0/51342DFD54324472CA257928001107B4/$File/65540_20 09-10.pdf

78. For an example of this approach, see Association of Superannuation Funds of Australia (ASFA), ‘ASFA retirement living standard’, viewed 12 November 2011, http://www.superannuation.asn.au/resources/retirement-standard 79. Ibid.

80. Ibid. For want of a comparison, the maximum age pension rate for a couple (including the Pension Supplement) was $31 699, Parliamentary Library estimates based on Centrelink, ‘Age Pension-Payment Rates’, Centrelink website, viewed 13 November 2011, http://www.centrelink.gov.au/internet/internet.nsf/payments/age_rates.htm

81. Ibid.

82. Ibid.

83. Association of Superannuation Funds of Australia (ASFA), ‘ASFA Retirement Living Standard’, viewed 12 November 2011, http://www.superannuation.asn.au/resources/retirement-standard

26 Superannuation Guarantee (Administration) Amendment Bill 2011

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Both approaches have their advantages:

 the budgeting approach emphasises the real costs faced in retirement, as well as taking account of the different lifestyles to which a retiree may aspire (that is, modest and comfortable in ASFA’s terminology). It also allows for the desired level of retirement income to be tailored to the area in which the person wishes to retire, and

 the replacement-rate approach directly links the retiree’s standard of living to their pre-retirement income.

Each approach has its weaknesses. The budgeting approach takes no account of a person’s capacity to save sufficient resources to achieve the desired post-retirement income. The replacement-rate approach does not take into account the costs a person faces in retirement. It should be noted that adopting the replacement-rate approach results in a lower amount of income, in dollar terms, being considered as an adequate retirement income than the budgeting approach.

Impact of increasing the Superannuation Guarantee rate from 9 per cent to 12 per cent on retirement incomes, on superannuation balances and income

There are a range of estimates on the impact on superannuation balances and post-retirement incomes of increasing the Superannuation Guarantee rate from 9 per cent to 12 per cent. A number of estimates are presented below. It is important to note that the methodology for each estimate may vary and be based on different assumptions about contribution rates, fund returns and other external factors.

 the Government estimates that a 30 year old woman earning around $70 000 will have an extra $108 000 in retirement savings providing her with an extra $2900 to spend each year of her retirement85, and

 a November 2010 report by the Australian Institute of Superannuation Trustees (AIST) examined the impact of increasing the Superannuation Guarantee rate from 9 per cent to 12 per cent for a number of case studies and compared the outcomes with ASFA’s retirement standards.86 The AIST found that the superannuation savings for:

84. Treasury, ‘Australia’s future tax system, the retirement income system: report on strategic issues’, May 2009, p. 14, viewed 13 November 2011, http://taxreview.treasury.gov.au/content/downloads/retirement_income_report_stategic_issues/retirement_incom e_report_20090515.pdf

85. B Shorten (Assistant Treasurer and Minister for Financial Services and Superannuation), ‘Second reading speech: Superannuation Guarantee (Administration) Amendment Bill 2011’, House of Representatives, Debates, 3 November 2011, p. 9, viewed 9 November 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansardr%2F3641b58 3-a42e-4045-9472-07db51574a42%2F0016%22

86. Australian Institute of Superannuation Trustees (AIST), ‘The benefits of an SG rate of 12 per cent’, AIST briefing paper, November 2010, viewed 12 November 2011, http://www.aist.asn.au/media/53428/aist_2010_11_brief_the%20benefits_of_an_sg_rate_of_12.pdf

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- a male who earns his own home and earns $62 000 would be boosted by $132 241, meaning

an extra benefit of $125 per week in retirement—lifting him above a ‘comfortable’ retirement income under the ASFA standard, and - a female with a seven year career break starting at the age of 30 who owns her own hone and

earns an annual salary of $42 000 would increase her superannuation savings by $69 384, an additional benefit of $59 per week in retirement—resulting in an almost ‘comfortable’ retirement income under the ASFA standard.87

 an April 2010 report prepared for the Henry Tax Review found that an increase in the Superannuation Guarantee to 12 per cent would raise the balance of superannuation assets by 30 per cent by 2150.88 However, private savings fall by almost 23 per cent, with households altering their savings behaviour in response to the higher mandatory contributions89

 an April 2010 AMP/NATSEM report estimated that the impact of increasing the Superannuation Guarantee rate from 9 per cent to 12 per cent would lead to a rise of $370 per annum in the amount saved by each person.90 Examples of circumstances modelled to illustrate the impact of the change on superannuation balances at age 65 include an employee working part-time and currently aged 35 to 44 years is projected to have $35 000 more in superannuation and typical employee currently aged 15 to 24 years and working full-time, increasing the Superannuation Guarantee rate to 12 per cent will add $150 000 to their superannuation balance by age 65 years91

 a September 2009 NATSEM report found that the effect of increasing Superannuation Guarantee contributions from 9 per cent to 12 per cent was to increase the average superannuation balances of persons aged 45-54 in 2043 by $41 000 and by $116 000 for those aged 55-64 in 2043.92 For persons aged 55-64 in 2043, the percentage of those with less than $200 000 is

87. Australian Institute of Superannuation Trustees (AIST), ‘The benefits of an SG rate of 12 per cent’, AIST briefing paper, November 2010, viewed 12 November 2011, http://www.aist.asn.au/media/53428/aist_2010_11_brief_the%20benefits_of_an_sg_rate_of_12.pdf

88. G Kudras and A Woodland (University of New South Wales), ‘Simulating policy change using a dynamic overlapping generations model of the Australian economy’, Paper commissioned for Australia’s Future Tax System, April 2010, viewed 12 November 2011, http://taxreview.treasury.gov.au/content/html/commissioned_work/downloads/Kudrna_and_Woodland.pdf

89. Ibid., p. 23. 90. AMP, ‘Saving tomorrow: the saving and spending patterns of Australians’, AMP/NATSEM Income and Wealth Report Issue 25, April 2010, pp. 23-24, viewed 12 November 2011, https://www.amp.com.au/wps/portal/au/AMPAUMiniSite3C?vigurl=%2Fvgn-ext-

templating%2Fv%2Findex.jsp%3Fvgnextoid%3D67c93e8b696f1210VgnVCM10000083d20d0aRCRD 91. Ibid.

92. M Keegan, ‘Mandatory superannuation and self-sufficiency in retirement: an application of the APPSIM Dynamic Microsimulation Model’, Paper presented to the Conference of Economists, Adelaide, 28 October 2009, p. 26, viewed 12 November 2011, http://www.canberra.edu.au/centres/natsem/publications?sq_content_src=%2BdXJsPWh0dHAlM0ElMkYlMkZ6aWJv Lndpbi5jYW5iZXJyYS5lZHUuYXUlMkZuYXRzZW0lMkZpbmRleC5waHAlM0Ztb2RlJTNEcHVibGljYXRpb24lMjZwdWJsaWN hdGlvbiUzRDEyNDImYWxsPTE%3D

28 Superannuation Guarantee (Administration) Amendment Bill 2011

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52 per cent with the 12 per cent Superannuation Guarantee compared to 59 percent under the 9 per cent scenario93, and  2008 modelling prepared by the Treasury for the Henry Tax Review’s Retirement Income Consultation paper noted that increases in the Superannuation Guarantee would increase the

replacement rate across all income groups (as measured by Average Weekly Ordinary Time Earnings (AWOTE)) (Table 3).

Table 3 Effect of increasing Superannuation Guarantee rate on replacement rates

Savings rate Average Weekly Ordinary Time Earnings (a)

0.75% 1.0% 1.5% 2.5%

9 per cent Superannuation Guarantee 79 68 56 48

12 per cent Superannuation Guarantee 84 74 62 55

15 per cent Superannuation Guarantee 88 78 67 59

Note: (a) Approximately $1150 per week. Source: ‘Australia’s future tax system: retirement income Consultation paper, December 2008, p. 20, viewed 13 November 2011, http://taxreview.treasury.gov.au/content/downloads/retirement_income_consultation_summary/Retirement_Incomes_C onsultation_Paper.pdf

Labour market and other economic impacts

The Superannuation Guarantee is often likened to a tax on employment, with employer contributions raising the cost of hiring labour. In these terms, critics of increasing the Superannuation Guarantee have argued that it is a disincentive for employers to expand their workforces.94

From an employee’s perspective, the Superannuation Guarantee can be viewed as a form of deferred wages, with the amount contributed by employers largely representing foregone wages.

The impact of the Superannuation Guarantee on employee wages and employment has been the subject of a number of academic studies and the conclusions reached have varied. However, to some extent the conclusions have been influenced to the extent that a counterfactual case has been considered—for example, in the absence of the Superannuation Guarantee, to what extent does the Government need to increase personal income taxes to take account of the greater reliance on the age pension in future years95?

93. Ibid., p. 27. 94. BusinessSA, ‘Submission on the tax forum discussion paper’, Future Tax website, September 2011, viewed 9 November 2011, http://www.futuretax.gov.au/content/taxforum/submissions/Business_SA.pdf 95. L Carter, ‘Labour market responses to the abolition of compulsory superannuation’, Australian Journal of Labour

Economics, vol. 8, no. 4, December 2005, pp. 351-364.

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Debates about where the economic incidence of the Superannuation Guarantee falls—whether it is on the employer or the employee—distinguish between the short-run effects and those that apply over the long run, where the incidence of Superannuation Guarantee may be passed on to customers (in the form of higher prices), employees (in the form of lower wages) and employers (in the form of lower profits).96

In general, academic studies have found that the incidence of the Superannuation Guarantee has fallen on employees, with employees having received lower wage increases as the Superannuation Guarantee was imposed and then increased.97 Superannuation industry groups have argued that the phased increase over several years will provide assistance to employers to adapt to its introduction and that the impact on wages costs in any one year will be small.98 The Association of Superannuation Funds of Australia noted that:

The increase in labour costs due to the SG increase in 2013-14 is likely to be minimal given that wage negotiations (both collective and individual) would take the SG into account when setting wages in that year. Typically nominal wages grow by around 3% a year, in line with general growth in prices and increases in community living standards. An SG increase of 0.25% or 0.5% in later years similarly would be relatively small relative to other labour cost increases incurred by both small and large businesses.

99

The Government has not prepared separate modelling on the broader economic impact of increasing the Superannuation Guarantee rate.

Recent modelling undertaken as part of the Henry Tax Review found that the long run effects of increasing the Superannuation Guarantee rate to 12 per cent was to reduce wages by 2.679 per cent.100 The impact on lower income earners was to actually reduce their overall welfare. This is due to these households being liquidity constrained and unable to smooth their consumption by spending more prior to the superannuation preservation age and by consuming less in retirement.

96. Allen Consulting Group, ‘Enhancing financial stability and economic growth: the contribution of superannuation’, Report to the Association of Superannuation Funds of Australia, August 2011, pp. 23-24, viewed 9 November 2011, http://www.superannuation.asn.au/policy/reports

97. J Freebairn, ‘Compulsory superannuation and labour market responses’, Australian Economic Papers, vol. 37, no. 1, 1998, pp 65; J Freebairn, ‘Some long-run labour market effects of the Superannuation Guarantee’, The Australian Economic Review, vol. 37, no. 2, June 2004, p. 196; L Carter, ‘Labour market responses to the abolition of compulsory superannuation’, Australian Journal of Labour Economics, vol. 8, no. 4, December 2005, p. 358.

98. Association of Superannuation Funds Australia, Submission to the House of Representatives Sanding Committee on Economics, Inquiry into the Mineral Resource Rent Tax Bills 2011, viewed 13 November 2011, http://www.aph.gov.au/Parliamentary_Business/Committees/House_of_Representatives_Committees?url=economi cs/mineralstax/subs.htm

99. Ibid.

100. G Kudras and A Woodland (University of New South Wales), ‘Simulating policy change using a dynamic overlapping generations model of the Australian economy’, Treasury website, Paper commissioned for Australia’s Future Tax System, April 2010, p. 24, viewed 12 November 2011, http://taxreview.treasury.gov.au/content/html/commissioned_work/downloads/Kudrna_and_Woodland.pdf

30 Superannuation Guarantee (Administration) Amendment Bill 2011

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Moreover, they receive a lower market wage rate from their labour supply that is behind smaller labour earnings and pre-retirement consumption.101

Modelling commissioned by the Association of Superannuation Funds of Australia of the impact on the economy of an increase in the Superannuation Guarantee from 9 per cent to 12 per cent found that real GDP would increase by 0.33 per cent by 2025, with other key outcomes on investment (+1.3 per cent), consumption (-0.59 per cent), employment (hours) (+0.03 per cent), exports (+1.04 per cent) and consumer prices (0.0 per cent).102

The impact of increasing the Superannuation Guarantee to 12 per cent on reliance on the age pension was modelled by NATSEM in 2009. By 2043, NATSEM found that that all income groups benefitted with higher superannuation balances and that as a result of this increase in super balances, 21 percent of the population aged 65-74 will not be entitled to an age pension, compared to 20 percent under the baseline scenario. In respect of the full pension, only 30 per cent will be eligible for a full pension, while under the baseline scenario 34 per cent were eligible.103

Alternative proposals to lift retirement incomes

The Henry Tax Review specifically examined a range of policy measures regarding superannuation savings including increasing the Superannuation Guarantee rate.

There have been a range of proposals to address perceived inadequacies of retirement incomes and superannuation. These include:

 the phased removal of the 15 per cent tax on superannuation fund income (made up of both contributions and earnings) and increasing the tax on the end benefits104  requiring all employees to contribute a percentage of their after-tax income to their superannuation account(s)105, and

101. Ibid., p. 26. 102. Allen Consulting Group, ‘Enhancing financial stability and economic growth: the contribution of superannuation’, Report to the Association of Superannuation Funds of Australia (ASFA), August 2011, p. 46, viewed 11 November 2011, http://www.superannuation.asn.au/policy/reports

103. M Keegan, ‘Mandatory superannuation and self-sufficiency in retirement: an application of the APPSIM Dynamic Microsimulation Model’, paper presented to the Conference of Economists, Adelaide, 28 October 2009, pp. 26-27, viewed 12 November 2011, http://www.canberra.edu.au/centres/natsem/publications?sq_content_src=%2BdXJsPWh0dHAlM0ElMkYlMkZ6aWJv Lndpbi5jYW5iZXJyYS5lZHUuYXUlMkZuYXRzZW0lMkZpbmRleC5waHAlM0Ztb2RlJTNEcHVibGljYXRpb24lMjZwdWJsaWN hdGlvbiUzRDEyNDImYWxsPTE%3D

104. Association of Superannuation Funds Australia, ASFA State of Play-Issues and Policy, October 2004, p. 6 105. See for example, Australian Industry Group, Submission to the House of Representatives Standing Committee on Economics, Finance and Public Administration, Inquiry into improving the superannuation savings of people under age 40, 22 July 2005, pp. 2-3, viewed 13 November 2011,

http://www.aph.gov.au/Parliamentary_Business/Committees/House_of_Representatives_Committees?url=efpa/sup er/subs.htm; and Industry Funds Forum, Submission to House of Representatives Standing Committee on Economics, Finance and Public Administration, Inquiry into improving the superannuation savings of people under age 40, pp.

Superannuation Guarantee (Administration) Amendment Bill 2011 31

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 increasing labour market participation.106

For some individuals, an increase in the mandatory superannuation contribution requirement at a time when superannuation fund performance is poor may not appear to be suited to their current circumstances. Some commentators have questioned the value and suitability of directing contributions to superannuation funds, which have experienced poor returns in recent years.107

In addition, there are proposals for targeting superannuation and retirement income support to those groups in the community that generally have low retirement incomes such as low income earners and women. This section examines the measures proposed in the Henry Tax review in more detail.

Henry Tax Review superannuation proposals

The Henry Tax Review examined retirement incomes in two stages:

 a report on strategic issues in May 2009, including the broad design aspects of the retirement income system108, and  a final report to the Treasurer in December 2009 that made further recommendations about the taxation of retirement incomes.109

Key recommendations from these two reports that relate to retirement income policy are set out in Table 4.

16-17, viewed 13 November 2011, http://www.aph.gov.au/Parliamentary_Business/Committees/House_of_Representatives_Committees?url=efpa/sup er/subs.htm 106. M Keegan, ‘Mandatory superannuation and self-sufficiency in retirement: an application of the APPSIM Dynamic Microsimulation Model’, paper presented to the Conference of Economists, Adelaide, 28 October 2009, pp. 15-18, viewed 12 November 2011, http://www.canberra.edu.au/centres/natsem/publications?sq_content_src=%2BdXJsPWh0dHAlM0ElMkYlMkZ6aWJv Lndpbi5jYW5iZXJyYS5lZHUuYXUlMkZuYXRzZW0lMkZpbmRleC5waHAlM0Ztb2RlJTNEcHVibGljYXRpb24lMjZwdWJsaWN hdGlvbiUzRDEyNDImYWxsPTE%3D 107. T Negline, ‘APRA exposes poor superannuation fund performance’, ATCBIZ website, viewed 18 November 2011, http://www.atcbiz.com.au/journalarticles.php?new=8kqp4ggx38&num=4; A Creighton, ‘Liberals drop ball in super free-for-all’, CIS website, 14 November 2011, viewed 17 November 2011, http://cis.org.au/media-information/opinion-pieces/article/3681-liberals-drop-ball-in-super-free-for-all 108. Treasury, ‘Australia’s future tax system, the retirement income system: report on strategic issues’, May 2009, viewed 13 November 2011, http://taxreview.treasury.gov.au/content/downloads/retirement_income_report_stategic_issues/retirement_incom e_report_20090515.pdf 109. Treasury, ‘Australia’s future tax system, the retirement income system: report to the Treasurer, Part 1 overview, December 2009, viewed 13 November 2011, http://taxreview.treasury.gov.au/content/downloads/final_report_part_1/00_AFTS_final_report_consolidated.pdf

32 Superannuation Guarantee (Administration) Amendment Bill 2011

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Table 4 Key retirement income policy recommendations of the Henry Tax Review

Report on strategic issues Final report to the Treasurer

The three-pillar architecture should be founded on the presumption that the responsibility for providing for retirement is shared between government and individuals.

Compulsory superannuation should ensure that a reasonable minimum share of employee income is saved to contribute additional resources to retirement. Because it is a defined contributions system, rather than defined benefits system, it is not appropriate or practicable to set a target replacement income rate for the Superannuation Guarantee. However, the rate of the Superannuation Guarantee can be benchmarked by reference to moderate potential replacement rates for retirees with a full history of contribution at median to average earnings.

Voluntary superannuation should provide a tax-assisted means for all to make self-provision for retirement in accordance with their circumstances and preferences. For reasons of both acceptability and sustainability, the extent of tax assistance should be capped.

The Superannuation Guarantee should remain at 9 per cent

The Superannuation Guarantee broadly should continue to cover employees (ie: not self employed) and the $450 per month threshold should continue to apply.

The tax on superannuation contributions in the fund should be abolished.

Employer contributions should be treated as income in the hands of the individual, taxed at marginal personal income tax rates and receive a flat-rate refundable tax offset.

An offset should be provided for all superannuation contributions up to an annual cap of $25 000 (indexed). The offset should be set so the majority of taxpayers do not pay more than 15 per cent tax on their contributions. The cap should be doubled for people aged 50 or older.

An annual cap on total contributions should continue to apply.

The offset should replace the superannuation co-contribution and superannuation spouse contribution tax offset.

Compulsory superannuation contributions made by employers should not reduce eligibility for income support or family assistance payments. They should also not form part of the calculation for child support.

The rate of tax on superannuation fund earnings should be halved to 7.5 per cent.

Superannuation funds should retain their access to imputation credits. The 7.5 per cent tax should also apply to capital gains (without a discount) and the earnings from assets supporting superannuation income streams.

Sources: ‘Australia’s future tax system, The retirement income system: report on strategic issues’, May 2009, p. 14, viewed 13 November 2011, http://taxreview.treasury.gov.au/content/downloads/retirement_income_report_stategic_issues/retirement_income_rep ort_20090515.pdf; Report to the Treasurer, Part Two: detailed analysis, vol. 1 of 2, December 2009, pp. 100 and 106, viewed 12 November 2011, http://taxreview.treasury.gov.au/content/downloads/final_report_part_2/AFTS_Final_Report_Part_2_Vol_1_Consolidated .pdf

The primary basis for the Henry Tax Review recommendations for proposing changed taxation arrangements is that, in the Review’s view, the existing tax rules result in an inequitable distribution of concessions.110 While the Review acknowledged that the 9 per cent contribution rate under the

110. Treasury, ‘Australia’s future tax system, Report to the Treasurer, Part Two: detailed analysis’, vol. 1 of 2, December 2009, p. 100, viewed 12 November 2011,

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Superannuation Guarantee will not be sufficient on its own to meet everyone’s retirement aspirations,111 the Review considered that for most employees on low to middle incomes, the 9 per cent Superannuation Guarantee rate can provide a reasonable balance between before and after retirement incomes and that individuals have the opportunity to save more.112 In commenting on the impact of increasing the Superannuation Guarantee rate to 12 per cent the Review noted:

An increase in compulsory saving would increase potential retirement incomes. However, it would also reduce an employee’s pre-retirement income. Low to middle income earners, who are typically unable to offset the impact of increased compulsory saving by reducing voluntary saving, could be expected to experience larger reductions in pre-retirement consumption opportunities than those experienced by higher income earners. For those who undertake other saving it would mandate a greater proportion of that saving in the form of superannuation. An increase in the superannuation guarantee would also have a net cost to government revenue even over the long term (that is, the loss of income tax revenue would not be replaced fully by an increase in superannuation tax collections or a reduction in Age Pension costs).

113

The Henry Tax Review proposals relating to superannuation were not accepted by the superannuation industry, which instead supported lifting the Superannuation Guarantee to 12 per cent. The Association of Superannuation Funds of Australia noted:

The Henry recommendations were based on interactions with a proposed personal income tax system that is substantially different to the current one, and which the Government has ruled out adopting.

As well, the Henry recommendations on superannuation would result in:

 Substantial ongoing costs to tax revenue;

 Individuals having to pay tax out of what was previously take-home pay (which could be 30 per cent or even 45 per cent on some or all of their super contributions); and

 Administrative complexity such as funds having to report contributions to the ATO; and every individual who has received a super benefit having to lodge a tax return, every year. 114

http://taxreview.treasury.gov.au/content/downloads/final_report_part_2/AFTS_Final_Report_Part_2_Vol_1_Consoli dated.pdf 111. Treasury, ‘Australia’s future tax system, The retirement income system: report on strategic issues’, May 2009, p. 11, viewed 13 November 2011,

http://taxreview.treasury.gov.au/content/downloads/retirement_income_report_stategic_issues/retirement_incom e_report_20090515.pdf 112. Ibid. 113. Ibid. 114. Association of Superannuation Funds of Australia (ASFA), ‘Spotlight on Henry: a comparative analysis of the Henry Recommendations with the proposed increase of the Superannuation Guarantee to 12 per cent’, ASFA Research and Resource Centre, viewed 13 November 2011, http://www.superannuation.asn.au/policy/reports/

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Key provisions

Amendments to the Superannuation Guarantee (Administration) Act 1992

Schedule 1-Superannuation Guarantee age and percentage

Increasing the Superannuation Guarantee charge from 9 per cent to 12 per cent

Item 2 repeals existing subsection 19(2), which specifies the current superannuation charge percentage of 9 per cent, and substitutes this for a schedule that increases the charge percentage incrementally each year from 1 July 2013 to 1 July 2019 when it reaches 12 per cent (Table 5).

Table 5 Schedule of increases in Superannuation Guarantee charges, 1 July 2013 to 1 July 2019

Date Charge percentage

1 July 2013 9.25

1 July 2014 9.5

1 July 2015 10

1 July 2016 10.5

1 July 2017 11

1 July 2018 11.5

1 July 2019 12

Source: Superannuation Guarantee (Administration) Amendment Bill 2011, proposed subsection 19(2).

Raising the Superannuation Guarantee age limit from 70 to 75

Item 4 amends paragraph 27(1)(a) to increase the age for which salaries or wages to an employee are not taken into account for the purposes of calculating the employer contribution from 70 or over to 75 or over, thereby requiring employers to contribute to superannuation on behalf of employees under the age of 75. Raising the SG age limit to 75 brings the SG amendments in line with provisions of the Income Tax Assessment Act 1997 (ITAA 1997) which allow employers to claim a full deduction for all contributions to superannuation funds made on behalf of their employees up to age 75 and allow self-employed people to make deductible contributions until they turn 75.115

115. Explanatory Memorandum, p. 6.

Superannuation Guarantee (Administration) Amendment Bill 2011 35

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As noted previously, the Government intends to introduce amendments to remove any age limit for Superannuation Guarantee contributions. At a minimum, this will require a repeal of paragraph 27(1)(a).

Application

Item 5 provides that the amendments proposed in Schedule 1 come into effect from 1 July 2013.

Conclusion

The proposal to increase the rate of employer superannuation contributions from 9 per cent of an employee’s ordinary income to 12 per cent over the period 2012-13 to 2019-20 is dependent on the Parliament passing the Minerals Resource Rent Tax package of Bills.

There are varying views as to the benefits of mandatory savings approaches to retirement incomes policy and on the necessity to increase the Superannuation Guarantee. While many groups in the community agree that measures to increase retirement savings are a positive change, the economic incidence of the tax is likely to result in lower wage increases for employees.

36 Superannuation Guarantee (Administration) Amendment Bill 2011

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