Labor’s superannuation policy change is sensible in these difficult fiscal times

As it stands, the proportion of the population aged 65 and over receiving the Age Pension has declined from 74 per cent in 2001 to 62 per cent by 2021, yet the proportion receiving the full pension rather than a part payment actually rose from 59 per cent in 2015 to 68 per cent.

While the rich can always find options to boost their wealth, superannuation should be beneficial to ordinary Australians to help them gain a decent super account at the time of their retirement given that 2019-20 ATO data shows huge differences between the average and median of funds for older Australians.

Hence, Labor could do more to ensure greater fairness in terms of promoting the superannuation savings of low-income earners.  

As it stands, many low-income Australians pay a 15 per cent tax rate on both their super contributions and earnings, far in excess of their taxation rate for total income.  

For Australian workers who earn the minimum wage of $42,000 per year in 2022, over two million according to the Fair Work Commission, the tax amount paid (around $4,500) calculates to be around 10.8%.

For those earning less, which is likely to include many women working part-time due to child commitments, the real income tax rate would be even lower.  

While the Low Income Superannuation Tax Offset provides a maximum payment of $500 per year, it is no wonder that some of the biggest industry super funds have called on the Albanese government to raise the amount and/or pay superannuation guarantee contributions on paid parental leave.

In contrast, median income earners (currently around $65,000 per year) have a capacity to benefit much more from superannuation rules, at least those who have paid of their house and have spare cash.

With concessional compulsory contributions currently limited to $27,500 a year, someone on $65,000 could salary sacrifice around $20,000 to boost super savings while reducing income taxation liabilities by $3250 (from a 32.5 per cent rate to 15 percent).

The median income earner can also contribute $3000 to their low-income spouse and receive a further $500 tax rebate.

A low-income earner can also contribute $1000 to get a maximum $500 co-contribution from the government if total income does not exceed $37,000.