AIST believes there are some serious flaws and equity issues with the Government’s proposed changes to the treatment of superannuation for temporary residents.

Under the proposal, employers will be able to pay superannuation for temporary residents to the ATO instead of a super fund. At a time when Australia is facing a skills shortage and needs to attract overseas workers this policy will discriminate as well as being an administrative nightmare for both employers and funds.

The worst aspect of the proposal is that if a temporary resident does not collect their super within five years of leaving the country, they forfeit the whole amount to the government. AIST is also concerned with the Government proposal to deal with lost super through the automatic consolidation of accounts to an employee’s current fund.

Unless a member opts out , this will happen without their knowledge. AIST believes some people would be far better off having their lost super sitting in a low-cost ERF like AusFund for $10 a year, than having their money automatically removed into a high cost, high fee environment.

Subjects requiring special attention:

AIST will continue to advocate for a lift in contributions from a mixture of individuals, employers and government contributions for the low paid.

AIST believes that all increases including individual contributions need to be compulsory and mandatory. We also need to address some significant savings gaps in the system including: removal of the $450 monthly earnings threshold; ways to boost the super balances of women and others with broken work patterns; the savings gaps for the genuinely self employed who are not required to self provide.

Action by the ATO to address the minority of rogue employers who don’t pay their employees SG is also needed and we need to phase out the contributions tax for low income earners as an incentive.

Finally, we need to address the conflict between sales and advice. In the year to June 2007, some $765 million of commission money came out of compulsory super contributions.

Principal’s comment:

An encouraging start to the year but the government will need to put in a solid second half if it is really serious about improving the retirement outcomes for all Australians, including women and low-income earners. So no talking in class, no day-dreaming and spend your tuck shop money wisely Mr Rudd!