The Government’s decision to again delay the introduction of the promised Superannuation Guarantee (SG) increases highlights the need for superannuation to be removed from the short-term political cycle, says SMSF Professionals’ Association of Australia (SPAA) CEO/Managing Director Andrea Slattery.
The decision, announced yesterday after the Government reached agreement with the Palmer United Party in the Senate, will put the current SG levy at 9.5% on hold until to 30 June 2021, when it will increase by 0.5 percentage points until it reaches 12% in 2025.
It reverses the Government’s announcement, made in the May Budget, to freeze the SG at 9.5% until 30 June 2018, and on 1 July 2018 to resume increasing it by 0.5% increments until reaching 12% in 2022-23.
Slattery says: “What this decision highlights is the urgent need to have an informed debate about measuring the long-term budget cost of superannuation and what is considered an adequate income for retirement, especially when it’s considered that people are now living, on average, into their mid-80s.
“In its submission to the Financial System Inquiry (FSI), SPAA recommended that major superannuation policy decisions be removed from the annual budget cycle and instead be subject to a five-year review as part of the intergenerational report. In light of this decision, the acceptance of that recommendation is more imperative than ever.”
She says the Government’s decision to make this short-term fiscal decision came at the expense of the long-term retirement goals of the Australian people.
“By linking the abolition of the mining tax with the decision to freeze the SG for seven years, the Government is again demonstrating that dipping into the superannuation ‘piggy bank’ is always an option when difficult fiscal decisions have to be made.
“SPAA was critical of the Budget announcement in May to delay the SG levy until 2018, and now Australians will suffer a further blow to their rightful ambitions to be self-sufficient in retirement.
“Moving the SG rate to 12% as quickly as possible was an important measure to ensure that Australians had adequate balances in their superannuation funds on reaching retirement.
“But this decision only works to undermine the public’s confidence in the superannuation system that’s the key plank to their long-term retirement planning,” she says.
The SMSF Professionals’ Association of Australia (SPAA) is the authoritative voice for the self-managed superannuation fund (SMSF) sector. SPAA, which represents professionals providing a range of services across various disciplines in the complex area of SMSFs, is an advocate for the highest professional standards and competence to ensure SMSF trustees always receive the best possible advice.
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