Abbott’s superannuation vision is plain shortsighted
Louise Arnfield is a part time bank teller who earns less than $37,000 a year.
If Tony Abbott wins the next election, Louise and others with similar circumstances will be much worse off financially, guaranteed.
That’s because Tony Abbott has promised to get rid of the Low Income Superannuation Contribution.
If there was any doubt about this, Tony Abbott sheepishly set the record straight in his National Press Club speech last week when he confirmed a Coalition Government would abolish this policy.
Introduced by the Gillard Government on 1 July 2012, the Low Income Superannuation Contribution ensures that low income workers pay no tax on their superannuation contributions. Under this policy, workers who earn less than $37,000 per annum, enjoy an effective tax refund up to the value of $500 on their superannuation contributions.
The effect of this policy is to ensure that low income workers do not have their superannuation contributions wiped out by tax. This provides workers with an incentive to stay in employment rather than consider dropping out of the workforce because much of their superannuation contributions disappeared in taxation.
This incentive-to-work policy is complimented by the Government’s recent increase in the tax free threshold from $6,000 to $18,000, which provides a substantial tax cut for low paid workers.
About 3.6 million Australian workers benefit from the Low Income Superannuation Contribution, many of whom are women working part time. If Tony Abbott is elected, each and every one of those 3.6 million workers will pay more tax on their superannuation contributions.
That’s the fact behind the false slogans of tax relief for households that Abbott has been peddling in his recent television ads.
Australia has an ageing population. The proportion of Australia’s population aged 65 and over is projected to almost double over the next 40 years. Today there are 5 working-aged people to every person aged 65 and over. By 2050, this ratio will fall to only 2.7 people.
As a nation we must plan and tailor our retirement savings policies to meet the challenges an ageing population will bring.
That’s why the Gillard Government is increasing compulsory employer superannuation contributions from 9% to 12% over the next 6 years.
This will ensure we relieve some of the inevitable pressure on our social security, health and aged care systems.
The Low Income Superannuation Contribution is an important spoke in the policy wheel to provide Australian workers adequate retirement savings. It provides low income earners with the tax incentive to save for retirement- a benefit for individuals and our nation’s future.
Tony Abbott’s pledge to remove this tax break for our lowest paid workers is not only unfair for the workers concerned, it will also place greater pressure on all tax payers into the future as the burden of financing an ageing population increases. This is short sighted economic planning at its worst.
Tony Abbott has said he will not make major changes to our superannuation system and most people probably think there is no difference between the major parties when it comes to superannuation.
But for low income workers like Louise there is a big difference, and it will hit them where it hurts.
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