This episode is brought to you by Super Members Council. They're here to protect in advance the interests of super fund members like you, making sure the way that your super helps you stays stable, effective and fair.
Good morning and welcome to the Daily OS. It's Sunday, the twenty second of June. I'm Billy Fitzsimon.
I'm Sam because Loski Sam.
It's lovely to be back with you on a Sunday morning.
Happy Sunday, Billy.
There's no other way I would want to spend my Sunday mornings other than talking to you about super.
It's a super Sunday. I let's feel good. Let's get into it because it is something that we all are participants in. Yeah, well, we don't spend that much time talking about especially for younger generations.
So did you know the amount of super annuation you get paid is about to change As of the first of July, the minimum amount of super YEW received is about to increase. So what does this actually mean for you? We will explain in today's podcast before we dive into today's topier. As it would have heard at the top, this podcast is sponsored by Super Members Council, but they have had no influence over the editorial content of this episode.
Before we get into the changes to super, I think we should first explain what super actually is, because it's something that impacts everybody. You know, at the very least you're giving your super details to your employer, but perhaps especially for younger people, we don't stop and actually have it properly explained. Take us through the fundamentals of this.
So super annuation, or we more commonly refer to it as super is a way of saving for retirement that is compulsory in Australia. You can kind of think of it like forced savings. I think that's a good way to think about it. And what it means is that employers are required by law to pay a percentage of your wages into an account, which is your super fund, which is then invested over time to help you build up savings for when you stop working. I often hear
people say, oh, I don't invest in shares. A response to that can be, well, you probably do if you have a super account, which we all do.
And the idea behind that is if you have ten dollars in a super account in twenty twenty five, you can make that ten dollars work harder for you by the time you're sixty five in thirty forty years, that ten dollars is hopefully twenty dollars exactly. And what's the history of this scheme?
So it hasn't been around for as long as you might think. It was introduced as a compulsory payment in nineteen ninety two by Paul Keating's government, and that means that people retiring now likely haven't actually had a super account for their entire working lies, unless of course, they were voluntarily putting money into a super account before nineteen
ninety two. Now, when it was introduced, the World Bank described Australia as actually being at the international forefront of policies to address the cost of aging.
And that's important, right because now we're kind of getting in to the why the why supers there.
Yes, that is the key point. That super has everything to do with how to deal with the economic needs of an aging population.
So you're saying that they can then have a pile of money to lean on, exactly, So spell that out for me, what exactly do you mean by that?
So the idea is that if people have more savings when they retire, then they won't need to go on the age pension, which is taxpayer funded. So therefore, in theory, it reduces the burden on governments, and that is something
that governments around the world are dealing with. As people live for longer, there is more of this drain on government resources, and so the question that governments around the world are grappling with is how do we set people up so that less people are in need of government support.
It's kind of this funny thing where you think, oh, it's great that people are living for longer and life expectancies are increasing, but that does come with economic challenges, and that is exactly what super is trying to address.
It's interesting that it's framed as you don't know yet that you're going to need this later, yeah, but you will, yes, So we're going to think decades ahead for you, even though let's be honest, probably younger people would want more money in their paychecks. What does it mean though for an average person today?
So today, it means that it is mandatory for your employer to pay a percentage of your wage into.
Your superfund, so it doesn't pass through your bank account, it goes straight to the fund. That's right.
And so at the moment that percentage is eleven point five percent. So let's say that you're earning seventy thousand dollars a year, your employer needs to be putting a minimum of about eight thousand dollars into a super fund for that year.
And so, Billy, is that amount of money that your employer is paying for your super is that on top of your salary.
It actually depends on your employer whether it's on top of or part of. So you always get paid super. That is consistent amongst every company. But some companies advertise the salary excluding super and then some advertise it including Super. So you have to make sure that you understand if the figure that you're presented with in your contract includes or excludes SUPER, and it will mean a different amount of take home pay. So the amount of pay that
you see today. And so if we go back to the example of earning seventy thousand dollars a year, if it's excluding SUPER, then that's when it means there will be another eight thousand dollars that you don't see today, but that is going into your super account. Or if it's including Super, then your take home pay is closer to the sixty thousand dollars mark and the rest is going.
Into super Okay, So it's basically reading the fine print and working out whether the eleven point five percent is on top of or including into that payment. What else do we need to know about how super works because I often see comments from people that are tapping into some of the more complex parts of super.
Well. One thing is that you can act actually make voluntary contributions. So we talk a lot about the mandatory contributions that your employer needs to make, but if you want more SUPER in your account, then you can make voluntary contributions. You can sacrifice part of your salary and you can either do that individually, or you can say to your employer, I want you to put more of my salary into this super fund.
And I guess that's the ultimate long term gratification. If you're putting more in, when can you access this kind of hidden treasure chest of super savings?
So the current rules are that you can access your super if you're between sixty and sixty four and have stopped working so have basically retired, or if you're sixty five and older even if you're still working and that age has changed over time as the age of retirement.
Interesting crease. I wonder if you know, in one hundred years in the future, is medicines better, technology is better? Whether the super age could even be higher than that? Would we have a superage of eighty?
Yeah, so interesting. I imagine sooner than in one hundred years it will increase.
Okay, And the reason why we're talking about all of this today is because we have this end of financial year deadline of the first of July coming up next week, and that's when super is changing. Talk me through those changes.
Yes, so it's kind of a mandated pay increase for everyone.
Well, how about that? Yes, how about that?
So as of the first of July this year, your employer will be required to put in twelve percent of your salary, which is up from the eleven point five percent I was talking about before. And you might be wondering, what does that actually mean for me? The zero point five percentage point increase alone could see a typical thirty year old retire with twenty two thousand more in their
super account. Now, what you might not know is that this increase that we're seeing in July, there have actually been a number of increases over the past few years. This is the final increase that is happening, so it's kind of going to stay at this level of twelve percent for a while.
So from July two thousand and two until the thirtieth of June twenty thirteen, the super eight was nine percent. There's been a gradual increase from twenty thirteen, so it's been kind of staggered over time, and it's quite a big increase. That's three percent more from twenty thirteen.
But just to give you one more number and then I promise we'll stop giving you all the numbers that taken together with the full increase from nine percent to twelve percent over the past decade, that could add up to more than one hundred thousand dollars in your superannuation savings by retirement because of all those increases.
And this isn't the only change that's coming to super There's been a lot of news about superbalances that are more than three million bucks.
Yes, although important to note that this isn't necessarily a definite change because it hasn't passed parliament yet. This is our proposal from the current government, but they haven't introduced the legislation and had it passed parliament yet. But essentially the government has announced a policy to increase taxes on earnings on super balances over three million dollars. Before I explain this, I need to explain how supers are taxed, which we haven't yet discussed.
Okay, so that's interesting. It's a form of income, I guess. So it's money that you are receiving from your employer, and so it is taxed.
It is taxed, but it's actually taxed at a lower rate than your regular income. So as a general rule, the money that goes into your super annuation is taxed at a rate of fifteen percent, and that is lower than all current income tax brackets. So you're paying less tax on your super than you are on your regular income, which is why some people might do those voluntary contributions
from their employer because it is taxed less. Now, that is what Labor has proposed to change for the money earned on super balances over three million dollars, that it wants to increase the taxes for those accounts. Treasurer Jim Charmers said is that those balances are beyond what is
necessary to fund a comfortable retirement. So basically, if the whole idea of this is to make sure that you have enough money to retire, more than three million dollars is more than enough for you to live a comfortable retirement, and so we're just going to tax the earnings of those balances a little bit more.
And to take that one step further, their rationale would be, we're going to tax that a little bit more because you can probably afford it if you're in that position, and that money will then be used to fund government activities, which could include everything from health, education, roads, defense, whatever the government needs to spend money on exactly.
Now there is more detail to it, and there is also some criticism of the policy. The opposition, for example, is against it. I don't know if it's worth getting into, partly because it is quite a small percentage of people that this increased tax, if it does pass, will apply to.
And I'm sure quite a smaller percentage of people who would be young people.
Who I genuinely don't know if any young people would have that amount in their super account.
If those tech billionaires that we talked about on Friday had super funds, if they were Australian, maybe it will apply to them.
It would definitely apply to one hundred.
Million dollars signing busus is. But yeah, i'd say overall this is kind of a topic that doesn't necessarily impact a whole heap of young Australians.
Well, I have the exact number of how many Australians overall it impacts. So ninety nine point five percent of Australians currently don't have more than three million dollars in super, So at the moment, this policy would only apply to zero point five percent of Australians of all ages.
Okay, So I feel like if we look at the two things that we discussed today, that three million dollar super tax change that's going to go through Parliament, you'll see that in the news, and it's good to be across, But.
The main definitely going to go through parliament.
Sorry, well, it will be tabled in Parliament, they'll have their big discussions and probably do some shouting and then we'll see what happens. But the big change that I think it is important for young people to be across is this increase from July and the minimum amount of super that we're all entitled to as Australians is going up and that is a really important part of our economic system that we're all participants in to be aware of and to chat through.
Absolutely, I look forward to seeing it my super account.
You know what you're worth thirteen percent?
Oh oh thanks Sam, Oh gotcha, we've got it on records. I'll just send this back to you.
Okay, that's a slightly awkward way to end podcast, but you know what, there's nothing like a bit of negotiation on air. That's all I've got time for your Sunday special super episode of Daily Ods. Thank you so much, Billy for taking us through that, and thank you for
listening to this part. It's a really good way to keep in touch with those things that you feel like you probably should have learnt in school, but maybe skip to day and we're always here to take you through the parts of your pay package and the parts of your life that always needs a little bit more explaining. We'll be back again tomorrow morning with another d dive. Until then, have a beautiful Sunday.
Bye.
My name is Lily Maddon and I'm a proud Arunda Bunjelung Calcutin woman from Gadighl Country. The Daily oz acknowledges that this podcast is recorded on the lands of the Gadighl people and pays respect to all Aboriginal and Torres Strait Island and nations. We pay our respects to the first peoples of these countries, both past and present.
Want to understand your super and how it's working for you, head to Smcaustralia dot com. Super Members Council is here to protect your savings now and into retirement.