By Nick Hartman
A member of the Government’s retirement income inquiry has proposed that super payments be made partly voluntary for low-income workers, the Australian Financial Review is reporting.
Deborah Ralston, an academic at Monash University, suggested that low-income workers would have to forgo too much money if the super guarantee was upped to 12% of income.
When in government, Labor legislated for Super to be increased from 9.5% to 12% by 2025. Prime Minister Scott Morrison and Treasurer Josh Frydenberg.
Dr Ralston made the suggestion as part of a wide-ranging letter sent on behalf of the Alliance for a Fairer Retirement System, a group which represents 11 organisations, to the inquiry. The letter was sent to Frydenberg on 2 July.
She suggested that the “forced savings” of super would lead to lower wages and low-income workers paying higher taxes on their super than on their income.
“Compulsory superannuation means that current wages are withheld for future retirement benefits,’’ Ralston writes in the letter.
‘‘As lower-income workers are likely to be mainly dependent on the age pension in the future, is this level of forced savings justified?
‘‘An effective tax rate on wages, compulsorily withdrawn, of 15 per cent inside the fund is higher than some workers pay on their take-home pay.
‘‘Should some or all SG contributions be voluntary for workers below a certain tax level and/or below a certain age?’’
This proposal has provoked a rebuke from union-backed industry super funds, with Industry Super Australia chairman – and former Labor cabinet member – Greg Combet calling the idea “a dangerous proposal that will see vulnerable workers slugged more in taxes only to end up with less money in retirement”.
On Friday Dr Ralston was named as one of three members of the retirement income inquiry. The inquiry will look into age pension, compulsory superannuation and voluntary savings (including home ownership).
Dr Ralston has stepped down from her position as chairman of the SMSF Association while the review is conducted.
Combet added that he felt that Dr Ralston’s membership of the inquiry is untenable.
“We have serious concerns about Dr Ralston’s ability to conduct an independent review of Australia’s retirement income system when it appears she opposes the very premise the system was built on, which is compulsory superannuation,” Combet said.
“In light of the need for the review’s findings to be unimpeachable, we believe the Treasurer should reflect upon the appropriateness of Dr Ralston’s appointment to the panel.”
The review will release a consultation paper in November 2019, with a final report to be provided to the Government in June 2020.