Superannuation guarantee increase harmful to young people, lawyers - Lawyers Weekly
As the superannuation guarantee increase is debated among politicians and the wider public, McDonald Murholme has voiced concern for the youngest Australian earners.
The Abbott government froze the superannuation guarantee at 9.5 per cent during the 2014 term, but under current legislation this will rise to 10 per cent in July 2021 before rising by 0.5 per cent every year until June 2025, capping at 12 per cent.
McDonald Murholme said lawyers are facing a “powerful” superannuation sector which could see an adjustment of practice to navigate tight restrictions on funds. Lawyers will also need to look out for a rise in unintentional “law breakers” from the increase.
“A failure to comply will create a whole new class of law breakers and add pressure on the legal systems,” said managing director Alan McDonald, adding young people have a lot more financial hardship and are struggling to save outside of their super fund.
Mr McDonald argues that the increase will leave very little dependable income for the youngest Australian earners, which could lead to bad investments and legal concerns.
“If 12 per cent of their income is largely out of reach, they might end up setting up self-managed super funds by the tens of thousands merely to control their money in super. This will also increase the need for extra compliance by the government’s regulators.”
Despite this argument, former prime minister Paul Keating has criticised MPs who are also calling for a delay in the increase, voicing concern on the future of the economy. Mr McDonald said he is ignoring the issues faced by younger Australians.
“All of these financial pressures result in a limited disposable income,” Mr McDonald said. “Mr Keating is out of touch as the young people of today have to provide not just for superannuation for their old age but many would like to save for a home and family.”
Mr McDonald suggests that young people, and particularly young lawyers, should have plans in place to manage this increase and ensure retirement sustainability.
“Favourable tax breaks offered by contribution to superannuation means that younger people, especially young lawyers, should be setting up their own superannuation fund and exploring all of the investment opportunities available to a self-administered fund.”
Reference: ‘Superannuation guarantee increase harmful to young people, lawyers’ , Lawyers Weekly, Friday 2nd August 2019