Call For Increased Australian Pension Contributions

by Mary Swire,Ttax-News.com, Hong Kong

16 March 2010

The National Secretary of the Australian Workers’ Union (AWU), Paul Howes, in a speech to the Conference of Major Superannuation Funds in Brisbane, looked for an immediate increase in superannuation contributions in order to avoid Australia having a large retired future population with inadequate retirement savings.

He said that Australia needs to start looking for new creative ideas on how to obtain a commitment from people to provide for a better retirement savings regime. He reiterated that the AWU backs an increase to 15%, from the current 9%, minimum compulsory superannuation contribution for all workers.

He added that there could be a number of ways that the target could be reached. “I have been on the record as favoring it coming through tax cuts”, he said, “and I haven't moved away from that position.” He accepted, however, that with a substantial fiscal deficit, personal income tax cuts were very unlikely at the present time.

He therefore suggested other ways to implement the policy – additional government contributions; more employer contributions; regulatory reforms to abolish commissions on contributions which act to retard savings funds; incentives for individuals to increase their own contributions; and/or substantial cuts in corporate tax if some of the corporate savings are redirected to superannuation. He stressed that the AWU “reject compulsory taxing of employees' disposable income as a funding source.”

However, despite pension adequacy being expected to be a part of the reform package within the Henry tax review, it is unlikely that the government will be in a hurry to make alterations to superannuation tax arrangements until after that review is published in the next few months.

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