(03) 9020 2905Legendary 80s Sydney pub rock band The Radiators sang: “You don’t get nothin’ for nothin’, but you always get what you deserve … a bit of pain never hurt”.
Sure, The Radiators weren’t lyrical geniuses. Far, far from it. But what they and their mullets were singing about is still pertinent now.
Win a bit. Lose a bit. Suffer a little. But we probably deserved it. That’s right on many levels. But let’s concentrate on one. Superannuation.
When you awoke last Monday morning, your world had changed. You probably didn’t recognise it. That’s okay.
Here’s what happened: Every day you work from now on, you’ll get more in your super. It’s only a poofteenth extra for now. But it will grow.
What kicked in on 1 July was the first lift in the Superannuation Guarantee rate in, officially, yonks. Essentially, Treasury calculated that 9 per cent wasn’t enough. So, it was decided, employers should pay more into their staff’s super.
It will rise gradually to 12 per cent in July 2019.
Sounds good so far, hey? More super for you. Nicer retirement. Where’s the pain?
“You don’t get nothin’ for nothin’.”
Is it just a straight win for employees, at the expense of employers? Are they the only winners and losers?
No. And no.
It’s almost certain the increase in the SG levy will come at a short-term cost to you (collectively). Employers are likely to at least partially offset the extra super for future pay rises. If you think that’s unfair, be aware that it might be “officially sanctioned” by the government.
The story goes that in the 90s, when SG was first introduced (at 3 per cent) and then increased (to 9 per cent in 2002), it was factored in when national wage rises were considered.
That is, employers were facing a legislated increase in the total packages they were paying employees of 9 per cent, over and above annual salary increases. “Authorities” took the increased burden on employers into account when handing down national wage increases.
I know employers specifically used it as part of the “overall salary increase” in their negotiations. And unions, at least partially, swallowed, or accepted, that story.
So, while 9 per cent was paid into your super, salaries were being held back (probably something less than that).
“A bit of pain never hurt.”
The Tax Office also loses.
Superannuation paid by employers gets taxed at the contributions rate of 15 per cent. If paid as salary instead, the ATO would receive between 0 per cent and 47 per cent from workers’ marginal tax rates.
The average wage is $70,000. And Treasury claims super is, at least short-term, a loser for them. That super costs the public purse is undisputed by either side of politics.
If there’s a cost to government, there’s a cost to you. If a government is raising less revenue here, they have to make it up there (or cut services).
The Opposition has said they will delay the increase. That is, they will freeze the increase at 9.25 per cent for two years. Their policy is that it will still get to 12 per cent, but in 2021, rather than 2019.
Regardless of politics, over which you have but one vote in a nation of 23 million, “isn’t there something I can do that’s maybe just a little bit selfish?”
I’m glad you asked! Of course there is.
Get more into super!
I know, I know. I’ve just spent 40 column centimetres bagging super and now I’m telling you to stuff more in. Yeah, the irony. And to top it off, I’m the biggest critic of super’s rules having the consistency of one of DebtGirl’s mud pies.
But as Bernie “Sandman” Fraser states, “it’s the super of the future”.
Super is, simply, a long-term, compounded low-tax investment. The more you put into it now, the more you will have later. More than you’d have with the same amount invested outside super. No-one argues that point.
The problem is making the sacrifice now. Especially for Gen Xers, who have monstrous mortgages and expensive kidlets to raise.
But salary sacrificing, even an extra $50 a week, on which you’ll save up to $16 in tax now, will add tens of thousands to your super at retirement.
Bruce Brammall is the author of Debt Man Walking (www.debtman.com.au), a licensed financial adviser and mortgage broker. bruce@debtman.com.au.