The 650-page retirement savings review, chaired by former senior Treasury bureaucrat Michael Callaghan, has found that increasing the SG rate to the legislated 12 per cent could cut working income by 2 per cent in the long run.
The review has also found that Australia’s retirement system is sound, stable and effective but could be improved. The report, however, stopped short of making any recommendations and instead lists out a number of key observations.
All eyes will now turn to Mr Frydenberg to see if he will push forward with an increase of the SG rate as businesses continue to grapple with the economic fallout caused by the global pandemic.
The SG rate is set to rise from 9.5 per cent to 10 per cent from 1 July 2021, followed by incremental half percentage point increases each year to 12 per cent on 1 July 2025.
Mr Frydenberg said the government would consider the report ahead of making a decision but homed in on the finding that an SG increase would result in a trade-off with take-home wages.
“The report looks at this in detail and makes the comment, and I will quote it: ‘maintaining the superannuation guarantee rate at 9.5 per cent would allow for higher lending standards in working life’,” Mr Frydenberg said.
“Working life income, for most people, would be around 2 per cent higher in the long run.
“So the report goes into some detail about the trade-off between a working life income and people’s wages, and that with an increase in the superannuation guarantee, and points out that the most effective way for people to secure themselves in retirement is not necessarily an increase in the superannuation guarantee, but by more efficiently using the savings that they do have.
“What the Prime Minister and myself, Jane and other colleagues have said is that we will consider in this report, will consider other views that have been placed out there and we will make a decision about that in light of current circumstances before the scheduled increase takes place.
“I note that this report is one voice and there have been many others in this space including the governor of the Reserve Bank who has pointed out clearly the trade-off between a person’s wages and the superannuation guarantee. The Grattan Institute has pointed out that trade-off as well. And we will make a decision by that time next year.”
Labor has vowed to fight back against attempts to unwind the legislated increase to super, with Opposition Leader Anthony Albanese stating that workers needed to rebuild their retirement savings in the wake of the pandemic.
Chartered Accountants Australia and New Zealand and the Australian Small Business and Family Enterprise Ombudsman had also previously called for a pause in the increase.
Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.
Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.