Industry superannuation funds are warning plans to axe a rebate for low-income workers will affect half of all working women and will disproportionately hit rural workers.
The funds are proposing a tax offset for all workers and scaling back the Coalition’s paid parental leave scheme in order to maintain the rebate.
The Coalition plans to scrap the $500 Low Income Super Contribution for people earning less than $37,000 a year as part of its bill to repeal the mining tax.
The move would cut as much as $27,000 from the retirement savings of 3.5 million Australians, mostly women and young workers, according to the body representing industry funds, Industry Super Australia (ISA).
The Minerals Resource Rent Tax (MRRT) repeal bill will also delay by two years increases to compulsory super contributions made by employers.
Combined, the two measures will slash $53 billion from the nation’s superannuation savings by 2022, ISA says in its submission to the Senate committee examining the bill.
ISA chief executive David Whiteley says the changes are unfair and unsustainable, as they leave low-income workers without a tax concession on their superannuation, while those on high incomes already receive concessions.
“We would be very keen to see that this committee recommends to the Parliament that every option is exhausted to make sure that all Australians are getting access to tax concessions on their super,” Mr Whiteley said.
The group warns axing the rebate will undermine efforts to improve women’s retirement savings, affecting the income of around 2 million or nearly half of all working women, including 80 per cent of female part-time workers.
The submission also says the changes will disproportionately affect four in 10 regional and rural Australians.
Paid parental leave on the table
ISA suggests a flat tax offset on super contributions of 20 per cent or more for all workers, as proposed in the Henry Tax Review, would “greatly simplify the existing system and lead to more sustainable and equitable outcomes”.
It is also urging Parliament to trim the Coalition’s paid parental leave (PPL) policy to help fund the rebate.
The Coalition’s leave policy proposes, for the first time, that workers will continue to receive super contributions from their employer while on parental leave.
But modelling by ISA suggests those benefits will be wiped out by scrapping the super rebate.
The submission says Parliament should aim to keep the rebate in mind as it debates the parental leave proposal: “So that the Superannuation Guarantee payment entitlement integral to the proposed PPL is fully realised and not eroded … in the initial period following parental leave, when most women prefer part-time work”.
The Coalition flagged cutting the contribution and delaying the increase to the Super Guarantee during the federal election campaign and earlier this month.
Labor has described the move as “warped” and has vowed to fight it in Parliament.