Last year, Liberal Senator Andrew Bragg put forward a proposal to allow workers earning $50,000 and under to opt out of compulsory super, arguing that it would allow taxpayers to better save for a home and that it would save the government $1.8 billion in the first year.
“Taxpayers could simply tick a box to get a refund when filing an annual tax return,” he said.
However, Industry Super Australia chief executive Bernie Dean said new research now shows that low-income workers in New South Wales will instead be hit with an extra $1.3 billion in taxes each year.
According to Mr Dean, with wages taxed at a higher rate than super contributions, Senator Bragg’s proposal would hike low-income workers’ tax bill and leave them with less retirement savings.
“This dangerous proposal could not only condemn more than 1 million New South Wales workers to poverty in retirement, it lumps them with a bigger tax bill now,” Mr Dean said.
“The numbers don’t lie. Opt-out super is a blatant tax grab that would be used to prop up the government’s budget bottom line, at the expense of hardworking NSW workers’ retirement savings.
“It’s bad for the economy and bad for NSW. Local NSW MPs need to call out this proposal for what it is or explain to their constituents why they support them paying more tax for no gain.”
According to ISA’s research, a 30-year-old working mum earning $50,000, who takes time out to raise children, would lose almost $300,000 from her super at retirement and pay more than $61,000 extra in tax.
Further, a 30-year-old man on $50,000 — who has a continuous career — will lose $533,000 from their retirement savings and be lumped with an extra $113,000 tax bill over his working life.
ISA believes the plan could force 4.3 million Australians — 1.3 million from NSW — to go onto or take more from the aged pension.
Mr Dean had recently criticised research by the Australian National University (ANU) which found that the current super guarantee of 9.5 per cent was “more than sufficient” for most people to achieve a comfortable income in retirement.
Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.
Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.