Latest news with #superannuation
News.com.au
7 hours ago
- Business
- News.com.au
Sting in the tail for some workers in super boost
Workers are being urged to check with their pay packets to ensure an increase to the super guarantee doesn't result in their pay being docked. As the final increase to Australia's super guarantee comes into effect, employers will be required to devote a record 12 per cent of workers' salaries into their super for the first time. For most workers on an award agreement, it's happy days, with employers forced to tip in extra super without any reduction in their take-home pay. But there's a sting in the tail for a minority of workers who are on a total remuneration package including super, because it could mean less take-home pay. In fact, for up to 40 per cent of Australians who have an individual pay arrangement with their employer that pays superannuation as part of their salary package, the 0.5 per cent could result in a reduction in take-home pay. CPA Australia's Superannuation Lead, Richard Webb said while the super guarantee was positive for a majority of workers, some would cop a pay cut from July 1. 'If your employment contract includes a total remuneration package including super, this could mean less take-home pay at the end of the month,' he said. 'However, for those on award or enterprise agreements, your pay agreement is more likely to be a salary, which means the change will not affect your take-home pay. 'It's a good idea to check with your employer to see how they view the changes and what it means for you. Otherwise, you might get a shock if your take-home pay is a little less than expected.' Nearly 30 years after the Hawke-Keating Government introduced superannuation starting at just 1 per cent, around 14 million workers are set to secure the new boost. New Treasury analysis shows that millions of Australians will be better off at retirement as a direct result as the super guarantee lifts from 11.5 to 12 per cent. 'These reforms will make a meaningful difference for millions of Australians who work hard on low and award wages, and Australians working towards a well-deserved, dignified retirement,'' Treasurer Jim Chalmers said. 'Under Labor, inflation is down substantially, real wages are up, unemployment is low, our economy is growing, debt is down and interest rates are falling, but we know people are still under pressure. 'All the progress we have made together means we are well placed and well prepared at a time of global economic uncertainty and volatility. 'Since we've come to government, we've increased the superannuation guarantee four times, and this means an extra $98,000 at retirement for a 30 year old earning the average full-time income.' For example, a worker at age 30 earning the average full-time income (around $103,000) will have an extra $21,000 at retirement as a result of this 0.5 percentage point increase alone. However, Treasurer Jim Chalmers said taking into account all of the Albanese Government's increases to the Superannuation guarantee (from 10 per cent to 12 per cent), this worker will have an extra $98,000 at retirement.
The Guardian
a day ago
- Business
- The Guardian
Fewer than 1% of households with multimillions in super could struggle to pay Labor's tax, study finds
Fewer than 1% of households with multimillion-dollar super balances could struggle to pay for Labor's additional tax on retirement balances above $3m. New ANU research also reveals that households liable for the extra earnings levy have 12 times the wealth of other households, including an average of $3.2m outside super and the family home. They also have more than two-and-a-half times the disposable income. Ben Phillips, an associate professor from the ANU's Centre for Social Policy Research, said the analysis undermined claims that many individuals would struggle to find the cash to pay for the proposed 15% earnings tax on balances over $3m, which is applied to notional gains rather than realised profits. Phillips said he had done the research to inform what he called the 'unprecedented' public debate of a relatively minor policy change that affected a very small proportion of wealthy Australians. 'These are very wealthy people with a lot of other assets, and also with a lot of income. It would be very, very surprising if all but a small handful of people would struggle to pay this tax,' he said. In particular, Phillips and his colleague Richard Webster, a senior research officer, wanted to test claims that taxing unrealised gains could force some to sell big assets – most notably farms – to pay the impost. With the farming lobby group mounting a campaign against the super tax, the research estimated about 2,400 people with large super balances are farmers. The farming lobby has claimed that cash-strapped but asset-rich farmers could be forced to sell farm land to raise money to pay the tax, which is calculated on the annual notional change in the value of their super balances. The modelling of ABS survey data showed that only 0.6% of the estimated 87,000 individuals with large balances, or 500 people, could struggle to find the cash to pay for the extra earnings tax. 'They are sort of 'unicorn' cases, and even then we don't know what's in their super accounts,' Phillips said, which he reckoned were likely to include enough liquid assets to pay the tax. 'That's not to say it's necessarily a good tax, but we are not seeing any barriers to these people paying a bit of extra tax on their super.' Sign up for Guardian Australia's breaking news email The paper models a scenario where an individual with $4m in super records a 10% gain, which – assuming for simplicity no contributions or withdrawals – incurs an extra tax of about $19,000. If that extra tax is more than 10% of the household's disposable income and other wealth (that is, wealth not in super or in the home), then that household fails the stress test. In this case, the household could struggle to pay the tax if they are also unable to easily pay the tax from their super savings. The modelling suggests the median high super balance household has annual disposable income of nearly $250,000, versus $95,000 for all households, and nearly eight in 10 own their own home outright. Two-thirds of the estimated 87,000 people with high super balances are men, three in four live in a capital city, and over half don't work. 'We really need to question why people have so much money in super for a start, when you only need enough to give you a comfortable retirement,' Phillips said. 'You also have to question – given the nature of super, where it's about getting money when you need it – why would you have large amounts of illiquid assets [assets not easily converted to cash]? That's not really what super is about. That seems to be more about a tax haven, rather than a saving vehicle for your retirement'
News.com.au
a day ago
- Business
- News.com.au
‘Financial disadvantage': Super boost to close gender gap
Major superannuation changes are set to roll out across the country starting from July 1, set to help millions of women bridge the gender pay gap. Starting next Tuesday parents taking government-funded paid parental leave will also receive a superannuation payment. This additional payment is estimated to help the near 200,000 Australian mothers each year and narrow the gender superannuation gap by around 30 per cent. According to the ASFA a woman taking 24 weeks leave the superannuation contributions will lead to $7,200 more at the time of retirement. When the regime is extended to 26 weeks, the boost to the super balance increases to around $7,800. ASFA chief executive Mary Delahunty said this is a major win for Australian women who take time out of the paid workforce to have and raise children, and helps reduce the superannuation gender gap. 'While compulsory superannuation has been delivering on its purpose of providing a dignified retirement for most Australians, it's long been known that women are often financially disadvantaged in retirement due to time taken out of work to have and raise a family. she said. 'The introduction of superannuation payments on government paid parental leave from 1 July on will go a long way to closing the gender superannuation gap.' Australian treasurer Jim Chalmers said paying super on paid parental leave from this Tuesday is part of our efforts to ensure parents earn more, keep more of what they earn and retire with more as well. 'A sornger paid parental leave system is good for families and good for the economy as well,' he told NewsWire. 'This important change means a more dignified and secure retirement for more Australian parents and especially women.' A second change which will see nearly 14 million workers will see their superannuation guarantee increase from 11.5 to 12 per cent starting from July 1. While the changes seem small, the treasury uses an example of a 27 year old woman who has taken up a graduate position as a professional lawyer. 'During her career, she takes an extended six-year career break for the birth and care of her two children,' treasury estimates. 'Her balance will be $22,000 higher at retirement as a result of the permanent 0.5 percentage point increase in the SG rate from 11.5 to 12 per cent.' Mr Chalmers says these reforms will make a meaningful difference for millions of Australians, helping them work towards a well-deserved and dignified retirement. 'Since we've come to government, we've increased the superannuation guarantee four times, and this means an extra $98,000 at retirement for a 30 year old earning the average full-time income,' Mr Chalmers said. While the Albanese government has implemented an increase of the Superannuation guarantee from 10 to 12 per cent. It was the then Morrison government who started the changes, which saw superannuation lift from 9.5 per cent to 12, at a 0.5 per cent increment a year. The treasury department says the changes to Tuesday's superannuation guarantee will see 14 million employees have their retirement lifted. The ASFA said this increase means a median 30-year old worker making $75,000 a year will add about $20,000 to their superannuation balance by the time they retire. This $20,000 increase will mean the median 30-year old will retire with $610,000 in superannuation, above the $53,383 a year or $595,000 they would need for a comfortable retirement. ASFA says a couple requires $73,875 a year or $690,000 combined in total to live comfortably in retirement using their super plus age pension top-ups. The major caveat to these figures for singles and couples is owning your own home by retirement. The National Minimum Wage and award wages will increase by 3.5 per cent from 1 July 2025, adding $0.85 per hour to $24.95 for full time staff. Treasury estimates this change will add $75,114 over the average working life of an employee.
RNZ News
a day ago
- Business
- RNZ News
Taxes will have to increase to cope with ageing population, government spending
The IRD has warned government spending needs to change or taxes will need to increase in the future. Photo: RNZ Inland Revenue is warning that unless what the government spends its money on changes, taxes will need to increase in the coming years to cope with an ageing population. It is currently seeking submissions on its latest long-term insights briefing. It notes that in the coming years, if the current settings are maintained, government spending as a proportion of the economy will rise. "A core driver of these fiscal pressures is that New Zealand's population is ageing." By 2060, a quarter of the population will be older than 65. "This means that the amount the government needs to spend on superannuation and health care will increase if the government maintains current policy settings. "In its last Long-term Fiscal Statement, the Treasury predicted that government expenditure will exceed government revenue by 13.3 percent of GDP by 2061 if the government takes no response to rising fiscal pressures," IRD said. That would mean either that existing taxes would need to be levied at a higher rate - such as higher levels of income tax or GST - or there would need to be new taxes implemented. It said New Zealand taxed a more limited set of capital gains than most other OECD countries. It could be possible to broaden that scope. "The absence of a general approach to taxing capital gains can provide an incentive for individuals to reduce their tax liability by undertaking activities that are not taxed rather than those that are taxed. "This can reduce government's ability to raise more revenue in a way that is progressive." It pointed to an estimate for a Tax Working Group report in 2019 that, if a capital gains tax took effect from the 2022 tax year, it would raise about $3 billion in the 2026 tax year. Revenue would increase over time. IRD said this was in line with revenue raised in other countries from capital gains taxes. "Revenue from capital gains could therefore make a meaningful contribution to addressing long-term fiscal challenges. "However [as noted above] the last Treasury LTFS projected an operating deficit of 13.3 percent of GDP by 2061 under current settings. "Therefore, even with more comprehensive taxation of capital gains other tax or expenditure measures would be needed in the longer term. "Therefore, Inland Revenue considers that it is also important to consider how to increase the flexibility of the tax system to changing revenue needs." It said capital gains taxes could also have relatively high compliance costs. Inland Revenue said GST was a substantial source of tax revenue. But if it were to be increased, there would be concerns about the effect on lower-income households. While wealthier households pay more GST overall, poorer households spend more of their money on GST. IRD said GST could be applied at a lower rate on some goods and services that were bought by lower-income households, or there could be assistance via the welfare system to help those households. "Several international and New Zealand-focused studies have shown that using cash transfers is a more cost-effective way to target assistance to lower-income groups compared to applying lower rates to certain goods and services. "Several countries have implemented permanent GST-offset schemes for this reason." The report used modelling of GST at 18 percent. It also considered how other taxes such as payroll tax, wealth tax, inheritance tax, land and property tax could be used to add further tax bases to the New Zealand system. But it said there were difficult trade-offs with each of these. "Payroll taxes provide a means of shifting the balance of taxation away from capital income and onto labour income, but they are likely to have some disadvantages relative to GST and income tax. "Wealth taxes are likely to impose higher distortionary costs than a broad-based income tax, and they face similar challenges to those that would make an idealised income tax that includes accrued capital gains impractical. "Inheritance taxes are likely to have similar distortionary costs to income taxes when people are intentional donors, but they will have much lower distortionary costs when people are unintentional donors. "Land taxes are widely seen as one of the least distortive taxes, and they impose fewer distortionary costs than property taxes or stamp duties. "However, they would have a significant impact on certain groups. As with any tax, providing preferential tax treatment to certain groups or in certain situations would tend to increase efficiency costs and reduce horizontal equity on some margins." IRD said this underscored the importance of income tax and GST being designed in a way that was as efficient and fair as possible while having the flexibility to adjust to changing revenue needs. "New Zealand faces difficult choices in designing a durable tax system in the face of long-term fiscal challenges. "In Inland Revenue's view, a priority for future work should be on how to make New Zealand's main bases of income tax and consumption tax more flexible to changing revenue needs over time." It said, with different personal and company tax rates there was an incentive for people to "shelter" their income in companies. "This incentive is likely to increase the wider gap between top personal tax rates and the company rate, however, in the context of rising fiscal pressures, a system that requires alignment of the company rate and top personal rate is unlikely to be a durable tax system." Economist Shamubeel Eaqub said IRD had a clear message that either tax rates would need to increase, or the tax base - or both. "There are some difficult choices to be had in the future, if spending choices don't change then our revenue choices have to. "And we can either tax more using the same instruments that we have on the same bases that we have or we can increase the bases, and there are no easy answers. "There are always trade-offs, there will be winners and losers. And we're going to have to make a considered decision of what we're going to do - no tax is easy. "No one likes paying tax. I think it's about finding the least disruptive system given the public services that we want." Sign up for Ngā Pitopito Kōrero , a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
RNZ News
a day ago
- Business
- RNZ News
Taxes will have to increase in 2060 to cope with ageing population, government spending
The IRD has warned government spending needs to change or taxes will need to increase in the future. Photo: RNZ Inland Revenue is warning that unless what the government spends its money on changes, taxes will need to increase in the coming years to cope with an ageing population. It is currently seeking submissions on its latest long-term insights briefing. It notes that in the coming years, if the current settings are maintained, government spending as a proportion of the economy will rise. "A core driver of these fiscal pressures is that New Zealand's population is ageing." By 2060, a quarter of the population will be older than 65. "This means that the amount the government needs to spend on superannuation and health care will increase if the government maintains current policy settings. "In its last Long-term Fiscal Statement, the Treasury predicted that government expenditure will exceed government revenue by 13.3 percent of GDP by 2061 if the government takes no response to rising fiscal pressures," IRD said. That would mean either that existing taxes would need to be levied at a higher rate - such as higher levels of income tax or GST - or there would need to be new taxes implemented. It said New Zealand taxed a more limited set of capital gains than most other OECD countries. It could be possible to broaden that scope. "The absence of a general approach to taxing capital gains can provide an incentive for individuals to reduce their tax liability by undertaking activities that are not taxed rather than those that are taxed. "This can reduce government's ability to raise more revenue in a way that is progressive." It pointed to an estimate for a Tax Working Group report in 2019 that, if a capital gains tax took effect from the 2022 tax year, it would raise about $3 billion in the 2026 tax year. Revenue would increase over time. IRD said this was in line with revenue raised in other countries from capital gains taxes. "Revenue from capital gains could therefore make a meaningful contribution to addressing long-term fiscal challenges. "However [as noted above] the last Treasury LTFS projected an operating deficit of 13.3 percent of GDP by 2061 under current settings. "Therefore, even with more comprehensive taxation of capital gains other tax or expenditure measures would be needed in the longer term. "Therefore, Inland Revenue considers that it is also important to consider how to increase the flexibility of the tax system to changing revenue needs." It said capital gains taxes could also have relatively high compliance costs. Inland Revenue said GST was a substantial source of tax revenue. But if it were to be increased, there would be concerns about the effect on lower-income households. While wealthier households pay more GST overall, poorer households spend more of their money on GST. IRD said GST could be applied at a lower rate on some goods and services that were bought by lower-income households, or there could be assistance via the welfare system to help those households. "Several international and New Zealand-focused studies have shown that using cash transfers is a more cost-effective way to target assistance to lower-income groups compared to applying lower rates to certain goods and services. "Several countries have implemented permanent GST-offset schemes for this reason." The report used modelling of GST at 18 percent. It also considered how other taxes such as payroll tax, wealth tax, inheritance tax, land and property tax could be used to add further tax bases to the New Zealand system. But it said there were difficult trade-offs with each of these. "Payroll taxes provide a means of shifting the balance of taxation away from capital income and onto labour income, but they are likely to have some disadvantages relative to GST and income tax. "Wealth taxes are likely to impose higher distortionary costs than a broad-based income tax, and they face similar challenges to those that would make an idealised income tax that includes accrued capital gains impractical. "Inheritance taxes are likely to have similar distortionary costs to income taxes when people are intentional donors, but they will have much lower distortionary costs when people are unintentional donors. "Land taxes are widely seen as one of the least distortive taxes, and they impose fewer distortionary costs than property taxes or stamp duties. "However, they would have a significant impact on certain groups. As with any tax, providing preferential tax treatment to certain groups or in certain situations would tend to increase efficiency costs and reduce horizontal equity on some margins." IRD said this underscored the importance of income tax and GST being designed in a way that was as efficient and fair as possible while having the flexibility to adjust to changing revenue needs. "New Zealand faces difficult choices in designing a durable tax system in the face of long-term fiscal challenges. "In Inland Revenue's view, a priority for future work should be on how to make New Zealand's main bases of income tax and consumption tax more flexible to changing revenue needs over time." It said, with different personal and company tax rates there was an incentive for people to "shelter" their income in companies. "This incentive is likely to increase the wider gap between top personal tax rates and the company rate, however, in the context of rising fiscal pressures, a system that requires alignment of the company rate and top personal rate is unlikely to be a durable tax system." Economist Shamubeel Eaqub said IRD had a clear message that either tax rates would need to increase, or the tax base - or both. "There are some difficult choices to be had in the future, if spending choices don't change then our revenue choices have to. "And we can either tax more using the same instruments that we have on the same bases that we have or we can increase the bases, and there are no easy answers. "There are always trade-offs, there will be winners and losers. And we're going to have to make a considered decision of what we're going to do - no tax is easy. "No one likes paying tax. I think it's about finding the least disruptive system given the public services that we want." Sign up for Ngā Pitopito Kōrero , a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
