Lifting the Superannuation Guarantee to 12 per cent unsurprisingly has widespread support from the investment industry. But the plan does not have universal community support. SIMON HOYLE reports.
At 3 am on November 23 the lower house of Parliament passed legislation for a 30 per cent tax on coal and iron ore profits. Headlines focused on how Prime Minister Julia Gillard secured the critical votes of three independent Members of Parliament to support the controversial mining tax. News also spread fast through the superannuation industry: but it focused on what the new tax means for national savings.
Part of the proceeds from the Minerals Resource Rent Tax will be used to fund an increase in the Superannuation Guarantee (SG), the amount of salary paid to people’s retirement savings, from 9 per cent to 12 per cent by 2020.
The tax will also reduce the corporate tax rate by 1 per cent to 29 per cent and provide $6 billion in funding for roads, rail and ports. It is likely that the tax will pass through the upper house, where the Greens hold the balance of power, when it is presented in the first three months of next year.
Opposition to the SG increase predictably comes from the other side of politics. The Shadow Minister for Financial Services and Superannuation, Mathias Cormann, was involved in a Senate Estimates hearing on the day of a roundtable hosted by Investment Magazine and sponsored by Challenger Financial Services, but the Opposition Leader’s chief of staff issued a statement. It said: “As you know, the Coalition’s position is clear and we do not support the super increase funded from the mining tax.”
Cormann has since said that a Coalition government would not rescind the SG increase if the legislation succeeds. But reservations also have been expressed by those representing lowincome- earners and workers with broken employment patterns (particularly women) – and out in the electorate, raising the SG is far from the sure-fire election winner some think it should be.
Eva Cox, the well-known feminist and convenor of the Women’s Equity Think Tank (WETT), is another opponent of the plan, but purely on equity grounds.
“Why don’t I support the increase? Because, I think the system itself is unfair because it puts an enormous amount of money into the pockets of the rich, and much less into the pockets of the less well off,” Cox says.
“I can’t see any reason why public money should be forgone on that sort of basis, and I think putting it up to 12 per cent is actually not going to do anything about the equity issues; it’s just going to make them worse.” Cox also works with the Aboriginal Unit at the University of Technology, Sydney and does not think a boost in compulsory superannuation savings will do “a damn thing” for indigenous Australians.
The Minister for Financial Services and Superannuation, Bill Shorten, says the general philosophy behind increasing the SG is simple. “There is little benefit in working for a long time and retiring poor,” he says.
Small business might be expected to oppose the plan too, but the chief executive of the Council of Small Business of Australia (COSBOA), Peter Strong, says the council frankly does not care if the SG is 9 per cent or 12 per cent or even 15 per cent; what COSBOA objects to is the administrative burden the SG already places on small business, which will not be alleviated. “Small business is about the real world,” Strong says.