It has recently been announced that a large part of the increased revenue expected to be obtained from the proposed Mineral Resource Rent Tax is to be directed towards an increase in the superannuation guarantee levy.
On 24 March 2011 the Federal Government announced that all recommendations of the policy transition group headed by Minister Martin Ferguson have been accepted and the Government has gained the support of the mining industry for the proposed Mineral Resource Rent Tax.
In the subsequent press conference and later articles the Government stated that a large part of the revenue from this tax will be directed towards funding the planned superannuation changes announced in May last year; including an increase in the superannuation guarantee levy to 12% and exempting low income earners from contribution tax. The Association of Superannuation Funds of Australia in conjunction with these announcements has urged the Government to implement the planned measures promptly through legislation.
The primary impact of the Government's increased revenue will be to enable Parliament to raise the superannuation guarantee levy rate from 9 per cent to 12 per cent. This will result in a further $108,000 in the retirement superannuation balance of an average waged worker currently aged 30. It will also bring Australia in line with other Organization for Economic Co-operation and Development (OECD) countries in terms of the replacement rates of income in retirement, as highlighted in the recent OECD 2011 Pensions at a Glance publication.
The second major change which can now be implemented because of increased public revenue involves the application of concession rates to those lower income earners who have their superannuation contributions taxed. Under the Government's proposed plan, from 1 July 2012 the Government will provide a contribution of up to $500 for workers with incomes up to $37,000, ensuring no tax will be paid on superannuation guarantee contributions for those with incomes up to that level in 2012-13.
Accordingly, all employers will need to monitor these changes closely in order to implement any required payroll system upgrades, review existing salary sacrifice agreements and establish recalculated cash flow projections.
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