The Federal Government’s planned increase should not go ahead
The compulsory superannuation guarantee rate is due to rise in 2021, but there’s good reason it should not go ahead.
Saver HQ
Don't miss out on the headlines from Saver HQ. Followed categories will be added to My News.
Australia’s $2.7 trillion superannuation kitty has come under threat in recent months and it’s causing a huge divide.
It would have seemed unimaginable a year ago that millions of Australians would have the ability to break into their super early.
When the coronavirus pandemic hit the Federal Government revealed a new scheme that allowed super fund members in financial distress to withdraw up to $20,000 from their savings well before stopping work.
Then more recently we have had a team of backbench Coalition MPs urging the Federal Government to delay the scheduled increase to the superannuation guarantee, which is set to rise from 9.5 per cent up to 12 per cent by 2025.
They believe small and medium businesses cannot afford the next legislated rise in 12 months time.
On July 1, 2021, the compulsory superannuation amount employers must pay is set to increase from 9.5 per cent to 10 per cent.
However, the nation’s economy is in recession and is facing its toughest economic period since the depression in the 1930s.
Millions of Australians have lost their jobs, many are relying on government support including JobSeeker and JobKeeper, and a large portion of the workforce won’t be able to return to employment easily once the pandemic passes.
Ultimately someone has to pay for this legislated increase and given we are in one of the toughest financial situations any one of us have ever lived through, now is not the time to be upping the SG rate.
It’s all well and good for those running the funds and unions – who are key players in the industry – to plead the SG rises are critical to ensuring Australians are less reliant on the age pension at the other end of their lives. But who foots the bill?
The legislated rise to 12 per cent must be delayed.
Workers will not be getting pay rises anytime soon and if the SG rises do proceed employees can be pretty damn sure they will have Buckley’s chance of getting any wage increases for a long time.
If the rate does rise this will leave less take-home pay for many Australians at a time when they desperately need it.
It won’t automatically result in a pay rise.
For instance if you earn $1000 a week and 9.5 per cent is taken for super, that leaves you with $905.
When the rate rises to 10 per cent this will leave you with $900 in your hand, unless of course your employer increases your salary which seems unlikely given the financial strain many businesses are under during the pandemic.