Super windfall for the young
Most workers will be thousands of dollars better off after July 1, when the compulsory employer superannuation contribution rises from 8 per cent to 9 per cent of wages. Younger people on average $30,000 salaries and with many employment years ahead will be about $30,000 better off at retirement, whereas someone who is now 50 and on $50,000 will be about $10,000 better off.
The Superannuation Guarantee, introduced 10 years ago, now covers about 92 per cent of Australia's workers. The Taxation Office has warned smaller employers and people like farmers, who hire casual staff, to pass on the increase or face harsh penalties.
Other changes to superannuation laws are also being introduced. Among the changes are:
- An increase in the personal contribution limit to $5,000, up from $3,000;
- Contributions being made on behalf of children are not taxable and relatives are able to make contributions up to $3,000 per child every three years;
- Baby Bonus payments can also be contributed;
- Workers between 70 and 75 can make personal contributions.
Within two years, workers should be able to select exactly how their super is invested, which should mean that individuals will take a more active interest in their funds' performance. At present, super contributions can only be directed to the fund that the employer or industry supports.
Critics of impending fund choice say, however, that this could put people's money at risk. It will allow a person to change fund providers based on performance. If people had changed their money into some international super funds last year some would now be looking at a 25 per cent loss, the critics say.