The Turnbull government has no plans to change a legislated increase in the compulsory superannuation guarantee in three years time, despite a think tank warning it would be a mistake.
Treasurer Scott Morrison says the increase from a current 9.5 per cent to 10 per cent in 2021 has been in place for some time.
“This hasn’t been an issue that we have been proposing any changes to,” he told reporters outside in Canberra ahead of next week’s budget.
But the Grattan Institute think tank is urging both sides of politics to drop the planned increase in the super guarantee, saying Australians are already on track for adequate retirement incomes.
Raising the compulsory contributions would not reduce workers’ take-home pay during their working lives, it argues.
“If our politicians really want to help low-income workers and are serious about fixing the federal budget, they should abandon plans to raise the super guarantee,” the institute said in an analysis released on Monday.
The next increase is scheduled for July 2021 because new enterprise agreements currently in negotiation will take into account the guarantee increase when setting wages.
Over the years to 2025, the super guarantee is due to hit 12 per cent.
The institute says the guarantee is no “magic pudding” because – as the Henry tax review pointed out – higher compulsory super contributions are ultimately funded by lower wages.
The main beneficiaries from a higher super guarantee will be high-income earners, who already reap most of the benefits from generous superannuation-linked tax breaks.
“By being forced to put even more into super, they’ll no longer pay income tax on that income,” the institute says.
Instead, increased contributions will be taxed at a flat rate of 15 per cent.
A Treasury analysis in 2013 estimated the annual cost of superannuation tax breaks would exceed savings on the age pension by about 0.4 per cent of gross domestic product in 2020 and will continue to be a net cost to the budget until about 2060.
“And then there will be 80 years of accumulated budgetary costs to pay back before the commonwealth government breaks even,” the institute said.