Under the measures announced by Treasurer Joe Hockey yesterday, the MRRT will be abolished and several related budgetary measures, including superannuation-related initiatives, will also be repealed or scaled back.
“Given that increases in the SG are funded largely from reductions in take-home wages or business profits, rephasing the SG could boost near-term economic activity,” the government argued.
“Any reductions in businesses’ overall wages bills would lower their operating costs, while employees could also receive more take-home pay in the near term.”
The government has committed to sticking with a phased increase in the SG to 12 per cent, but has legislated a pause in those increases, such that the SG will remain at 9.25 per cent for the 2014 and 2015 financial years, then resuming gradual increases until reaching 12 per cent in July 2021.
The LISC, essentially a $500 superannuation bonus for those earning under $37,000 per year, is repealed under the new legislation.
Other changes include changes to the capital allowances for small business entities, the repeal of loss carry back measures, a repeal of the school kids bonus, and a repeal of the geothermal exploration deduction.
The Financial Services Council, however, welcomed the fact the SG would still reach 12 per cent, commending the government for sticking with the increase.
“The government has a clear mandate to repeal the MRRT whilst retaining the key policy of increasing super contributions to 12 per cent by 2021,” FSC chief executive John Brogden said.
“FSC research demonstrates there is a retirement savings gap of over $1 trillion. Increasing superannuation contribution rates are critical in closing this gap and ensuring more Australians have adequate retirement savings.
“The repeal of the MRRT contributes $13 billion of savings to the Budget over the forward estimates and is an important step in establishing structural balance in the Budget. The repeal of the MRRT works in tandem with an increase in the SGC, which will reduce the Budget impact of an ageing population over the long term.
“Today’s announcement removes any doubt that the government is committed to promoting certainty and stability in superannuation policy and will increase the SGC to 12 per cent,” he said.
