Calls to scrap compulsory super shot down

22 February 2016

The peak body for industry funds has opposed proposals from an unnamed industry group to allow low-income earners to opt out of compulsory superannuation, arguing it would leave around two million Australians in the workforce worse off in retirement.

The Australian Institute of Superannuation Trustees (AIST) was responding to media reports that reported on a pre-budget submission from the unnamed industry group, which proposed that those earning less than $37,000 a year could effectively receive a 9.5 per cent pay rise if they were to take home their super.

The AIST argued that allowing low-income workers to opt out of super would have a negative impact on part-time workers and women who currently retire with about half the super of men.

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Executive manager, policy, David Haynes, said the move would impede the ability of future generations of taxpayers to fund the Age Pension, and would affect the long-term fiscal sustainability of the retirement income system.

"Super is not the solution to plugging Budget holes or lifting wages. It's about improving retirement outcomes for all Australians that include those on low incomes," Haynes said.

"It doesn't matter if you are a full age pensioner, a part pensioner or a self-funded retiree, every extra dollar of super makes a difference."

Senior cabinet ministers wanted Federal Treasure, Scott Morrison, to consider the idea of low income earners opting out of super, according to media reports.

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If it's OK for super fund members to "opt-out" under FOFA, its should be OK for low income earners to "opt-out" of SGC payments while they are struggling to exist day to day. If the Opt Out system for low income earners had been operating since 1991, it is highly unlikely that $700 million in lost super accounts would have been transferred into the Government's coffers. The way the Super Funds are reacting, you would think it had been suggested that these workers had received a 9.5% pay cut, rather than a mortgage payment boost.

The government is not about to reinstate the tax offset for low income earners, given the dire budget position. Hence the ability to opt out would therefore mean an effective cut in the tax from 2017, especially important given low-income earners receive no real benefit from existing tax concessions on contributions to their super.

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