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2011 Federal Budget: What about super’s 4 forgotten issues?

By Trish Power - posted Tuesday, 10 May 2011


g) Australians in their thirties and forties who won't experience a full working life with SG and won't have the benefit of bigger caps in their fifties.

2. Fix the Cynical Manipulation of Indexation:

Mr Shorten, in May 2009, your Government colleagues announced that the non-concessional (after-tax) contributions cap would remain at $150,000, the same level as the 2008/2009 cap. It was also stated that in the future, the cap would be indexed at 6 times the level of the indexed concessional contributions cap, with the indexation clock turned on from July 2009.

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I think that policy announcement may have been a little "porky pie" by your colleagues. Before this May 2009 announcement, the Government had announced in March 2009 that the contributions cap was to increase to $165,000 for the 2009/2010 year.

In effect, the May 2009 announcement cut the cap by $15,000 and ignored the past three years of indexation. The Government had turned back time and believed that no one would notice. The SuperGuide team certainly noticed, as did our many thousands of SuperGuide readers.

For your information, the contributions caps have not been indexed since they were introduced in July 2007, because the indexation rules (based on movements in average wages) require any adjustment to be at least $5,000 before the caps are increased.

The first indexation of the caps was to occur from July 2009, until the Government announced its indexation swifty. For example, a $5,000 increment on a $25,000 cap represents a 20 per cent increase in wages, which means Australians will now be waiting many more years before the $25,000 cap is increased.

What an absolute con! Please Mr. Shorten, don't make the same arrogant mistake when implementing superannuation policy. Review this unfair and opaque policy.

3. And the Same Goes for Co-Contribution Indexation:

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The co-contribution scheme is one of the few female-friendly super policies. In May 2009, the Government announced that the indexation of the income thresholds for co-contribution eligibility would be frozen for 2 years; up to the 2011/2012 year. I'm assuming that indexation will resume from July 2012.

For my views on the Government's decision to freeze indexation of the co-contribution thresholds, I suggest you read our SuperGuide article on the topic: Sneaky sneaky – no indexation in co-contribution income threshold for 2 years.

In May 2009, the Federal Government 'temporarily' cut the maximum co-contribution payment available from $1,500 to $1,000. In May 2010, the same decision-makers announced that they would permanently freeze the maximum co-contribution payment at $1,000. I explain the impact of this policy on Australians in the article It's official: Co-contribution cuts hurt middle Australia and women.

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About the Author

Trish Power is an author and journalist who lived a former life as a superannuation tech-head. She is the author a number of books on super and investing, including super bible, Superannuation For Dummies, 2nd Edition (Wiley). Trish describes much of her financial writing as educative journalism. She is passionately committed to raising the level of financial literacy in Australia and empowering individuals to improve their financial circumstances. She is also the founder of SuperGuide.com.au - a free superannuation resource for all Australians.

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