The Australian Institute of Superannuation Trustees (AIST) has welcomed the initiatives in the Federal Budget aimed at improving the wellbeing of Australians, particularly those on low incomes. This included announcements that the tax rate on the earnings of super accounts with balances of more than $3 million would increase to 30% from 2025-26, and that employers would be required to pay super at the same time as wages from 1 July 2026.
Why payday super payments makes sense
The proposed introduction of payday super payments made sense because they were now part of a digital process that placed no additional burden on employers. This is a win for workers and will improve the retirement balances of millions of working Australians.
It will also enable employees to identify under-payment or non-payment of their super earlier and approach their employers and, if necessary, the ATO, to rectify the situation before it gets out of control. In fact, there’s no reason why businesses and other employers need to wait until 2026 to do this and, if they want to be recognised as employers-of-choice in an increasingly tight labour market where competition for staff is intense, they should act now.
The increase in the concessional rate would help to address the inequity of super tax concessions because $3 million was well above the balance needed for a comfortable retirement and 30% was still lower than the highest marginal tax rate. Most Australians, in particular women, can only dream of having a super balance of that size.
The reality is that after years of working in lower paid jobs for less money than men, plus time out of the workforce caring for family, women face a retirement that is likely to be far from comfortable. AIST was also pleased the govt had made changes to the non-arm’s length income (NALI) provisions. This is what AIST had sought so it’s a great outcome for fund members as the unintended consequences and associated costs have been addressed.
Aged care staff too rewarded
The Australian Institute of Superannuation Trustees also welcomed the announcement that from 1 July 2023, more than 250,000 frontline aged care staff – including nurses, carers, cooks, recreational officers and home care workers – would receive a record 15% pay rise.
As the Superannuation Guarantee is based on salary and wages, this will increase the value of payouts to these long-overlooked workers, over 90% of whom are women. It’s an overdue initiative for people doing critical work to support older Aussies that goes a bit further toward addressing the gender gap that sees women retiring with about 40% less super than men.
Although these initiatives improve the equity of Australia’s $3.4 trillion retirement savings systems, more has to be done to ensure it met the needs of all Aussies, particularly women.
This includes paying the Super Guarantee (SG) on Commonwealth paid parental leave, raising the maximum income eligible for the low-income superannuation tax offset (LISTO) to $45,000 a year to align with marginal tax brackets and lifting the maximum low-income superannuation tax offset (LISTO) to align with the yearly Super Guarantee increase.
Parental leave remains the only paid leave without super, despite being introduced 11 years ago, and without the low-income superannuation tax offset threshold being increased, there are thousands of low income workers who receive no tax break via super, which is a fundamental benefit of super. We know the Government is aware of these anomalies and we look forward to them correcting them and helping to reduce the super gender differential.
Eva Scheerlinck is the Chief Executive Officer at AIST.
