HAVING SUPERANNUATION IS A RELIEF.
A relief because it means that there is a savings account to help you save for retirement without having to think too deeply about it. Your employer is required to make contributions to your superannuation account on top of your pay. It’s designed to earn interest by investing. Super also helps pay for insurance and advice to keep you on track for a decent retirement. The SDA has been campaigning for superannuation since the 1980s and we will keep doing so until it’s the best system it can be. Super should be paid on every dollar a person earns – so it should be paid to under 18s, on employer funded parental leave and other payments, and most certainly it should be paid on pay day.
Currently, there’s no requirement for employers to pay your superannuation on the same day as your pay and it is generally paid quarterly. Importantly, when super is only paid quarterly the benefits of compound interest are lost for the individual employee – that money is sitting with the employer for 3 months when it could have been earning interest for the employee. This is unfair for workers who deserve every opportunity to grow their retirement savings. The Super Members Council have found “for 9 million Australians, having super paid on paydays – and not four times a year – will mean they start earning compound investment returns sooner, delivering an extra $7,700 on average by retirement.”
The SDA has argued for pay day super, and it has been promised by the Albanese Labor Government. If legislated, pay day super will come into effect on 1 July 2026.
SUPER IS ALSO TAX RELIEF.
Part of the social contract of superannuation is that you defer your wages, and you pay less tax as a result. And part of the tax system is that if you earn more, you pay more tax. But the two tax systems haven’t kept up with each other, undermining the social contract.
A recent announcement from the Government is to improve the way those taxes work to make it fairer.
At the moment, if you earn $190,000 you get a 30% discount on your tax by putting money into super, but those earning $45,000 get 1%. That’s not fair and needs to be fixed. If passed, the changes will see that problem fixed. The upshot is that the changes will see a deposit of up to $810 in the super accounts of low-income workers resulting in 15% tax or zero if they’re not earning above the tax-free threshold. So, if you hear about a thing called “LISTO”, that is what it is about. It is the Low-Income Superannuation Offset.
For those with a balance of less than $3 million, the $810 deposit due to the “LISTO” amendment is the only change of note. If someone has more than $3 million and the money is in a pension, the earnings on that money is taxed at 30% – rather than 15%. For those with balances of $10 million, their earnings will be taxed at 40%.
The SDA has a long tradition of supporting what is called ‘progressive taxation’ as well as the integrity of superannuation. Many of our members remember how the SDA argued against the GST because it’s not a fair tax. We often described it as ‘regressive’ because the rich paid the same as the poor. For super, it is proper that high income earners and those with high balances in super are taxed lower than they would in income or company tax, and that lower paid workers get greater tax benefits than higher paid workers.