Senate goes soft on super reform
The superannuation sweeteners announced by the Government in the May budget have been passed by the Senate, while more fundamental reforms, such as a reduction in the surcharge rate, have been removed from the relevant legislation after failing to gain support from opposition parties.
The sweeteners include regulations to allow relations and friends to make super contributions of up to $3,000 on behalf of a child over a three year period; allowing the Baby Bonus payment to be contributed to superannuation; increasing the deduction limit for personal contributions from $3,000 to $5,000; and allowing working people aged 70 but less than 75 to make personal contributions to super.
The measures were included in the Taxation Laws Amendment (Superannuation) Bill (No.2), which was passed by the Senate with amendments late last week.
According to Challenger head of technical services Alex Denham, while the simpler changes are all good, they do not do anything to address the issues of simplification and adequacy.
“Some of the regulations are completely useless, such as the child contribution,” she says.
While the quarterly payment of superannuation guarantee contributions and the making of personal superannuation contributions non-deductible for those over age 70 got the green light, the Labor party opposed measures in the bill to change the minimum wage eligible for superannuation guarantee entitlements from $450 per month to $1350 per quarter. Also removed from the bill was the plan to reduce the surcharge rate from 15 per cent to 10.5 per cent over three years.
The superannuation guarantee of 9 per cent will also take effect today along with the above changes. This represents an extra $500 in super contributions for someone paid $50,000 per annum.
Denham says while this is an improvement, various modelling demonstrates that even for someone starting out on this level of superannuation guarantee, that it will not generate enough money to retire on.
“A whole review is needed and the pressure is on now. But super has become a huge political issue,” she says.
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