The new compulsory superannuation contributions – how does it work?
Legislation has been introduced to parliament to increase the compulsory superannuation contributions from 9% to 12% and to abolish the Superannuation Guarantee age limit.
The Super Guarantee will be increased in instalments and not reach 12% until 2019-2020.
Employers will be charged with the extra cost of superannuation, although the government will also feel some impost through lower table income. For the Government this loss of earning will be somewhat clawed back through the government’s proposed Minerals Resource Rent Tax.
The Super Guarantee increase was aimed at helping Australians maintain a lifestyle in retirement that they have become used to while working.
If the legislation is passed the transition to 12% will kick off on 1 July 2013. There are 7 incremental increases until it reaches 12% on 1 July 2019.
The proposed timeline is below:
| Year commencing | Increase | Total |
|---|---|---|
| 1 July 2013 | 0.25 | 9.25% |
| 1 July 2014 | 0.25 | 9.5% |
| 1 July 2015 | 0.50 | 10% |
| 1 July 2016 | 0.50 | 10.5% |
| 1 July 2017 | 0.50 | 11% |
| 1 July 2018 | 0.50 | 11.5% |
| 1 July 2019 | 0.50 | 12% |
Abolishing the Superannuation Guarantee age limit
Included in the Government’s legislation was the abolition of the Super Guarantee age limit. In other words, employers will be responsible for contributing super regardless of an employee’s age – it’s currently capped at 70 years.
As we are living longer than ever before we must change our laws to move with the new life expectancy.
"We see this as a good move – if you’re working, you should be entitled to add to your retirement savings,” said Melanie Evans, BT Head of Super and Platforms.
“Both the increase in the Super Guarantee and the abolition of Super Guarantee age seek to close the retirement savings gap faced by Australians. Although this legislation is not likely to be passed quickly, it's been on the Government's agenda for some time and it’s great to see it enter the Lower House."
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Disclaimer and Disclosure
This publication has been prepared and issued by BT Financial Group Limited ACN 002916458. While the information contained in this document has been prepared with all reasonable care no responsibility or liability is accepted for any errors or omissions or misstatement however caused. All forecasts and estimates are based on certain assumptions which may change. If those assumptions change, our forecasts and estimates may also change.
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