Australian Industry Group chief executive Innes Willox. Picture: AAP
Labor’s plan to abolish the income threshold over which businesses must make superannuation contributions on behalf of workers would threaten jobs, increase compliance costs and do little to help women, according to a peak industry body.
Australian Industry Group chief executive Innes Willox said yesterday that Labor’s plan to reduce the threshold, set at $450 a month in 1992 when superannuation became compulsory, to zero would “add significantly to the direct costs of employment and to business compliance costs”.
“In addition, the extra superannuation guarantee payments will give rise to higher payroll tax liabilities. These additional costs will reduce the capacity of businesses to employ and invest and will reduce the contributions of business to the economy,” Mr Willox said.
Labor made the proposal last week as part of a set of measures including paying superannuation contributions on government-funded paid parental leave “to improve women’s super security”.
“For many women the benefits of a higher superannuation balance on retirement will be significantly diluted by the age pension assets and income tests. For these women additional superannuation balances will be partly offset by lower age pension entitlements,” Mr Willox said.
He said a large proportion of extra contributions, potentially more than one-third, would go to men; and of the remaining additional contributions, 15 per cent would be paid in tax and another proportion would be deducted as fees by superannuation funds.
“It is important to note that the $450 per month superannuation guarantee threshold was put in place in 1992 in part to address compliance cost concerns,” he said.
The Productivity Commission’s draft superannuation report released in May, estimated about half a million more employees were covered by the system in 2016 than would have been had the threshold been indexed to inflation. “The threshold for mandated contributions has also not changed with wage growth, pushing more younger and lower income people into the super system,” it said.
It indicated that if the threshold had been indexed, it would now cut in at about $1000 a month.
The commission report highlighted the prevalence of high-fee, low-return superannuation accounts, especially among those lower income workers who were less engaged with their fund. According to Treasury analysis, more than 50c in every dollar of the extra super contributed by the removal of the $450 threshold would be consumed by fees and insurance premiums.
By Adam Creighton (Adam Creighton is an award-winning economics journalist with a special interest in tax and financial policy. He spent most of 2016 at the Wall Street Journal in Washington DC. He won the Citi Journalism Award for Excellence in 2015, and was runner up in the internationally recognised Bastiat Prize for Journalism in 2014. He started his career at the Reserve Bank of Australia and studied economics at Oxford, where he was a Commonwealth Scholar. In 2017 he was appointed to the National Archives of Australia Advisory Council.)
24 September 2018