Budget makes retirement more difficult for low income earners
There are a number of measures contained in the federal Budget that will have a profound impact on people’s retirement, with a couple of measures directly affecting low income earners’ ability to save for their retirement.
Unfortunately the Budget will see the increase in Superannuation Guarantee from 9% to 12% slowed down so that the full Superannuation Guarantee increase won’t take place until 2022/23. This will mean that the Superannuation Guarantee will stay at 9.5% (after 1 July 2014) until 2017/18 before increasing 0.5% each year until it reaches 12% in the 2022/23 Budget.
In effect this measure will limit the ability of low income earners to grow their retirement savings over that period of time through the Superannuation Guarantee. This particular measure is made worse by another measure buried in the Budget details – the repeal of the Low Income Super Contribution (LISC).
The Low Income Super Contribution acts as a ‘tax rebate’ of up to $500 compensating workers earning up to $37,000 for the tax they have paid on their compulsory super contributions.
The repeal of the LISC will affect about 3.6 million Australian workers; approximately one third of working Australians, almost 80% of female part-time workers and about 40% of rural based workers. It will affect working mums, labourers, students, and apprentices.
Repealing the LISC means low income earners will be the only group of working Australians who do not receive a tax concession on their super contributions; and will be taxed more on their super contributions than on their take home pay.
Should the Abbott Government remove the LISC, we know it will have a huge, negative impact on some of our members and their ability to save for retirement.
It’s hardly a Budget that builds a better future for all Australians.
