Second Reading Speech
Senator TROETH (Victoria-Parliamentary Secretary to the Minister for Agriculture, Fisheries and Forestry)
I move:
That this bill be now read a second time.
It is with great pleasure that I introduce this bill.
This is a Government that believes in incentives. We believe that all Australians should have the opportunity to obtain a better standard of living in retirement than what the superannuation guarantee and the age pension can achieve alone.
It was this Government that introduced the co-contribution scheme on a $1 for $1 basis for eligible low income earners who make voluntary superannuation contributions.
But we now propose to take it further.
This bill will provide a $2.7 billion boost to superannuation incentives over three years. This builds on the Government's retirement income policy achievements to provide incentives, flexibility and security in retirement.
From 1 July this bill will increase the matching rate to $1.50 per $1 of employee contributions up to a maximum Co-contribution of $1,500. If an eligible person pays $1,000 into superannuation, the Government will match it with up to $1,500.
This bill also increases the lower income threshold, up to which the maximum co-contribution applies, to $28,000. Furthermore, for the first time employees with incomes between $40,000 and $58,000 will become eligible for the co-contribution. Currently the co-contribution phases out completely at $40,000.
These changes will improve retirement savings for over one million Australians who already receive the Co-contribution, even if they do not change their saving behaviour. More importantly, it facilitates a significant improvement in retirement incomes for those willing to save a bit more.
As an example, where a member with a current income for co-contribution purposes of $25,000 makes the minimum level of contributions required to receive the maximum government co-contribution over a 30 year working life, then the member's real accumulation balance is projected to increase by $106,000. This represents an improvement of 86% compared to the balance from Superannuation Guarantee contributions alone.
For someone earning $36,000 (approximately median earnings) and who makes the minimum level of member contributions required to receive the maximum government co-contribution over a 30 year working life, then the member's real accumulation balance is projected to increase by $51,000. This represents an improvement of 28% compared to the balance from Superannuation Guarantee contributions alone.
This bill does more than provide a more generous co-contribution scheme. Over the next three years, it will accelerate and further reduce the maximum superannuation contributions surcharge rate to 7.5 per cent for higher income individuals, relative to current scheduled reduction from 15 per cent to 12.5 per cent. More than half a million Australians will receive a boost to their retirement savings as a result of this initiative.
In total these measures are estimated to cost the Government $2.7 billion over the forward estimate years. More than three quarters of the benefits provided by these measures or $2.1 billion are targeted to low and middle income workers.
The measures presented in this bill provide a significant opportunity for employees to improve their standards of living in retirement. It is for this reason that I commend the bill.