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Super co-contribution extension good news, but Govt should go further.



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Senator John Cherry Superannuation spokesperson Australian Democrats

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14 March, 2004 MEDIA RELEASE 04/180

Super co-contribution extension good news, but Govt should go further

The extension of the $920 million Low Income Earners Superannuation Co-contribution to workers earning less than $450 a month is great news, but the Government needs to go much further in building the retirement savings of low income earners, the Australian Democrats say.

Democrats’ Superannuation spokesperson Senator John Cherry, who last year persuaded the Government to double the funding and reach of the Low Income Earners Co-contribution, said boosting the savings of low income earners was essential to reduce the long term cost of the pensions system.

"This new measure is good news for low income earners, as 4.6 million Australians will now be eligible for a matching Government co-contribution for any voluntary superannuation payments they make," Senator Cherry said.

"The latest change fixes an anomaly for very low income casual workers who are currently excluded from the Superannuation Guarantee system by the $450 monthly income threshold.

"The Democrats have strongly backed the Low Income Earners Co-contribution scheme as a way of improving the retirement income of low income Australians.

"The scheme should be extended over time to apply to employer contributions as well as employee contributions.

"This could effectively make the employer superannuation contributions for low income earners tax free, a move the Democrats have long advocated, to address the unfairness of the flat 15% tax on superannuation contributions.

"The flat 15% tax means that the tax concession for a worker on $20,000 is just 3.5% (18.5% less 15%), while the tax concession for a worker on $80,000 is 33.5% (48.5% less 15%).

"The co-contribution scheme has started levelling the playing field to give low income earners a fairer go on superannuation savings.

"But a wider scheme applying to both employer and employee contributions will be needed to fully address the bias in favour of high income earners in current superannuation tax arrangements," Senator Cherry concluded.

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