Superannuation changes: Coalition bush electorates likely hardest hit by super changes, economists say

Updated

Some economists say the Coalition's own electorates will be hardest hit by changes to superannuation announced this week.

The Government's deal with the Palmer United Party (PUP) to scrap the mining tax will see increases to superannuation delayed until 2021.

The low-income super contribution, introduced by Labor as part of the mining tax package, will be axed in 2017 rather than earlier as the Government had wanted.

The changes will mean tens of thousands of dollars foregone in retirement savings for low-income earners, many of them concentrated in seats held by the Nationals and country Liberals.

Former prime minister Paul Keating described the changes as "wilful sabotage ... for reasons only of prejudice".

Financial planner David Newberry said low income earners already get little or no tax benefits from contributions to their superannuation.

"Super contributions are taxed at 15 per cent, so there are many people who would actually be in a position where the tax rate on their super contributions would exceed ... the tax rate if money was taken as salary or wages," he said.

The low-income super contribution returns up to $500 paid in tax to super accounts of people who have earned less than $37,000 that year.

Marcia Keegan from SGS Economics and Planning said low-income earners could be worse off by tens of thousands of dollars.

"Someone who's earning $35,000 a year for most of their working life is going to retire with 16.7 per cent less superannuation than they otherwise would have, which is quite a hit," he said.

"Only a small proportion of this loss is going to come from a freeze in the superannuation guarantee contribution rates.

"There's going to be a 13 per cent drop resulting from the removal of the low income super contribution."

I think it hits regional areas because it hits low-income earners, which happen to live in regional areas because [they] can't live or afford to live in the metropolitan areas Financial planner David Newberry

An analysis of the last census data by left-leaning think tank the Australia Institute indicates Nationals' electorates will bear the brunt of the changes.

Mr Newberry, whose practice is in Tamworth, estimates at least 20 per cent of his clients will be affected.

"I think it hits regional areas because it hits low-income earners, which happen to live in regional areas because [they] can't live or afford to live in the metropolitan areas," he said.

"So the whole superannuation system doesn't really favour low-income earners.

"As a matter of fact, it's quite the opposite, it favours the rich."

The electorate predicted to be the hardest hit is Cowper, which is held by Assistant Employment Minister Luke Hartsuyker, a Nationals MP.

The analysis suggests more than 46 per cent of all people employed in his New South Wales north coast seat will lose the low-income super contribution.

Mr Hartsuyker said the Government has had to make hard decisions.

"High-income earners have the ability to get by with a far lower level of government services but low-income earners depend on government to deliver that," he said.

"We can only deliver that if we have a budget that is under control and that has required the difficult decisions that we've had to take."

Calculator: How will the changes affect your super? Choose the age and salary that most closely match yours to get an estimate of how much less super you'll have available by retirement age.

Notes Calculations assume: wage growth of 3 per cent per annum; inflation of 2.5 per cent per annum; after tax and fee super earnings of 6.25 per cent.

Data and modelling: Industry Super Australia Choose the age and salary that most closely match yours to get an estimate of how much less super you'll have available by retirement age.

Topics: superannuation, federal-government, australia, nsw

First posted