The current mandated SG rate for employers is 9.5 per cent of their ordinary time earnings, with a gradual increase by 0.5 of a percentage point every financial year from 2021–22 at 10 per cent up to 12 per cent by 1 July 2025.
But according to the Retirement Income Review final report, one of its key observations was that a more efficient use of savings in retirement can have a bigger impact on improving retirement income than increasing the SG.
Further, it noted the weight of evidence suggests an increase in the SG rate will result in lower wages growth, thus impacting standards of living.
The report suggested a number of ways that individuals can significantly boost their retirement incomes without having to increase their superannuation contributions, such as more effectively drawing on superannuation assets, achieving better-after-fee returns and accessing equity in their home.
In September, small business ombudsman Kate Carnell wrote a letter to Treasurer Josh Frydenberg supporting such a freeze, proposing a two-year deferral on legislated SG increases.
She also called to cut the 15 per cent tax on compulsory employer superannuation guarantee contributions down to 7.5 per cent during that time.
“Many small businesses are already struggling to stay afloat as a result of the COVID-induced recession and cannot afford to pay higher costs,” Ms Carnell said.
“These increased costs would put small-business owners under even more financial strain, placing jobs and businesses at risk.”
However, according to Industry Super Australia, the suggestion that super increases are at the expense of wages growth, and that claiming working life income would be 2 per cent higher if the super rate does not lift as legislated from 9.5 per cent to 12 per cent, seem ill-founded.
It said the reality is that the super rate has increased just 0.5 of a percentage point in the last 18 years, and that real wages growth has been sluggish in that time, and that many other factors determine income growth.
“We hope [the final report] will not be used to ask Australians to sacrifice hundreds of thousands in guaranteed retirement savings for a vague promise of a wage increase that history shows will not occur,” said ISA chief executive Bernie Dean.
“The two-thirds of Australians who support the legislated and long-promised super increase would not take too kindly to politicians, who pocket 15 per cent super on top of their generous salary, using this review to snatch away their retirement savings.
“This report’s findings must be used to support sensible reforms that will grow members’ savings, not cherry-picked to support pre-conceived policy ideas that will leave people and the nation worse off.”