assets in infrastructure and property, sectors with relatively unionized work-
forces, as retail funds.
10.3 Australia’s Super System Today
10.3.1Accounts
Australian employers are currently obliged to direct 9.5 per cent of employees’
earnings up to $203,240 a year into an eligible superannuation fund of the
employee’s choice.^10 If an employee doesn’t choose a fund, their employer
will for them, guided in some cases by industrial agreements. Accounts are
fully vested with the individual account holders (although courts can split
accounts in case of divorce), may be consolidated with other accounts, and are
bequeathed at death.
This arrangement is known in Australia as the Superannuation Guarantee
(SG). It is effected via the Superannuation Guarantee Charge Act 1992, which
imposes on employers who do not comply a tax that that exceeds the guar-
antee liability.^11 The SG is a minimum; state and federal public servants and
university lecturers typically enjoy SG rates of 15 per cent or more, and most
employers allow their staff to make extra contributions. In practice, the SG
rate for most workers is 8.075 per cent because all contributions are taxed at
flat rate of 15 per cent.
Over the year to June 2015 employers paid around $20 billion every three
months into superannuation funds on their employees’behalf, equivalent to
around 10.5 per cent of the national wage bill. While employers are formally
obliged to make mandatory contributions (at least for staff earning more than
$450 a month), in the long run the incidence of compulsory superannuation
falls entirely on workers, reducing their‘take-home’pay.‘The increase in the
employee’s retirement income is achieved by reducing their standard of living
before retirement’, concluded the Rudd government’s 2010 inquiry into the
taxation system.
During 2015 individuals added a further $5 billion and $6 billion a quarter
to their accounts. Generous tax concessions, which encourage workers to
make contributions to superannuation from their pre-tax income, encourage
contributions above the minimum rate. The total value of voluntary and SG
contributions cannot exceed $30,000 annually for those under 49 years of age,
and $35,000 for those 50 and over (designed to help tardy savers‘catch up’as
(^10) Contribution rates are 10% and 6.5% in Chile and Mexico, respectively.
(^11) In 2011 Roy Morgan, an Australian pollingfirm, challenged the validity of the Act, arguing
that because its purpose was not to raise funds for general revenue it could not be sustained under
the Commonwealth’s taxation power. The High Court dismissed the case, arguing a law does not
cease being a tax because raising revenue is secondary to its purpose.
We Must All Be Capitalists Now