Did you know that we have recently celebrated 20 years of Superannuation in Australia. Governments in most countries are very aware of the effect of the aging population and planning ahead for retirement has long been a key focus.
From the mid-nineteenth century, occupational superannuation existed in Australia amongst white collar employees, but it was not until the 1970s that private superannuation became more widely available through its inclusion in industrial awards.
For much of its history, Superannuation covered only a minority of Australians. By 1983 it still only covered about 40% of the nation's workforce. Attempts in 1928, 1938 and 1976 to introduce a universal superannuation system all failed. In 1985, amid an uneasy economic climate, the Government and the Australian Council of Trade Unions agreed to introduce productivity award superannuation, which allowed for part of the award system's wage increase to be a 3% superannuation contribution. By the late 1980s superannuation had extended to about two-thirds of the private sector. However, the low rate of contribution was not sufficient to substantially improve retirement incomes for the average paid worker.
In 1991, the Industrial Relations Commission's rejection of a further 3% increase to award superannuation led the Senate Select Committee on Superannuation in June that year, to inquire into 17 issues including taxation of superannuation, vesting of benefits, prudential controls, superannuation simplification, adequacy of public education and the rules governing employer contributions.
On 20 August, the Government announced the introduction of SG in its Budget, stating that SG would provide:
- a major extension of superannuation coverage to employees not currently covered by superannuation
- an efficient method of encouraging employers to comply with their obligation to make contributions on behalf of their employees
- an orderly mechanism by which the level of employer superannuation support could be increased over time, consistent with the Government's retirement income policy objectives and the economy's capacity to pay.
The Superannuation Guarantee Charge Act 1992 and Superannuation Guarantee (Administration) Act 1992 (SGAA) came into effect from 1 July 1992, mandating a minimum level of employer contributions, with a charge imposed for failures to meet that minimum, which is then distributed to employees' super funds. Administration of the super guarantee acts was entrusted to the ATO.
In the first year after the introduction of SG, 80% of employees were covered. By 1999 this had increased to the present coverage of 91% of employees, a significant shift in just 16 years since the 40% coverage of 1983. The compulsory minimum level of employer contributions began at 3% and had risen to the current 9% by 2002.
Further enhancements to our super system arise from key government reviews: the Australia's Future Tax System Review and the Super System Review, better known as the Cooper Review.
Following consideration of recommendations from both reviews, the Government, in its 2010 Budget announced significant changes to Australia's superannuation regime, primarily focused on the ability of each Australian to be able to accumulate adequate retirement savings.
A keystone of these changes is the proposed increase to the superannuation guarantee contribution rate from 9% to 12% by 1 July 2019. Raising the age limit from 70 to 75 years is another significant proposal that would take effect from 1 July 2013.
If anything, we have been forced to make plans for ourselves, as there is little doubt the government will be stretched to continue with Retirement Benefits at their curretn level. Perhaps the 12% is a good thing...but it is more than likely still not enough!
