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Super rise is fine, but who'€™ll pay for it?

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The Treasurer Wayne Swan’s goading of billionaires such as Fortescue Metal’s Andrew Forrest for their negligible tax bills might seem like a good political idea.

It’s especially so at the moment when the Gillard Government is trying to win over small business with a one per cent cut in the company tax linked to the mining tax but it’s not great leadership.

The new game for Labor is that it’s trying to show some, hitherto formerly ignored, small business sympathies but it is conflicted by its very own policies.

The Treasury-inspired press releases tell us that 3.6 million low-income Aussies will receive a $1.9 billion boost to their super. Adding to the pathos is the fact that two million low-income women should be popping champers and toasting Twiggy Forrest and his taxable mining profits, because their super is heading up.

The mining tax will help lift compulsory super from nine per cent to 12 per cent from 1 July next year until 2019-20. And for those on incomes around $40,000, there’s a 15 per cent tax rebate in the offing, which will be rechanneled into their super funds to help turbocharge them.

This is overdue, good policy from the Government but it’s a pity there is not as much quality leadership on who pays this three per cent spike in super payments.

Eight millions workers will see their compulsory super payments grow to 12 per cent but will the boss pay? Or will it be the super saver who will ultimately benefit?

The Workplace Relations Minister and the Minister for Super, the same man — Bill Shorten — seems to be saying workers should pay it. His union buddies are not on a unity ticket with him and so a super wage claim to cover the super rises is looming.

But is he really saying bosses won’t pay for it? At least he seems to be acting as though he is trying to save bosses from another cost increase and so it is a big test for him.

One of Paul Keating’s great wins was getting unions to collective bargaining and so this is a Keating-esque challenge for Bill.

The slug of this super ‘gift’ to workers is $20 billion and employers presumed they will be paying it. Heather Ridout of the Australian Industry Group is calling for wage trade offs but can Labor really politically afford to give a three per cent present to their potential voters, many of whom presently hate their carbon tax, and then ask them to pay for it?

This would be good economics, however it’s bad economics that generally represents good politics.

The Minister currently is saying that putting more of your pay into super is a deferred pay rise as you pay only 15 per cent on the money that goes to your fund.

But his union buddies aren’t buying this and bosses aren’t buying they won’t be paying.

If Shorten pulls this off he’ll be Labor’s great white hope. I’d like to put money on it but I like money too much.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

For advice you can trust book a complimentary first appointment with Switzer Financial Planning today.

Published on: Tuesday, March 27, 2012

The Switzer Super Report is a newsletter and website for self managed super funds. With exclusive commentary from Peter Switzer, Roger Montgomery, Paul Rickard and Charlie Aitken the Switzer Super Report will help you maximise your after tax investment returns and grow your DIY Super. Click here for a free trial or subscribe today.

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