Speaker 1: This episode is brought to you by Super Members Council.
Speaker 1: They're here to protect in advance the interests of super
Speaker 1: fund members like you, making sure the way that your
Speaker 1: super helps you stays stable, effective and fair.
Speaker 2: Good morning and welcome to the Daily OS. It's Sunday,
Speaker 2: the twenty second of June. I'm Billy Fitzsimon.
Speaker 1: I'm Sam because Loski Sam.
Speaker 2: It's lovely to be back with you on a Sunday morning.
Speaker 1: Happy Sunday, Billy.
Speaker 2: There's no other way I would want to spend my
Speaker 2: Sunday mornings other than talking to you about super.
Speaker 1: It's a super Sunday. I let's feel good. Let's get
Speaker 1: into it because it is something that we all are
Speaker 1: participants in. Yeah, well, we don't spend that much time
Speaker 1: talking about especially for younger generations.
Speaker 2: So did you know the amount of super annuation you
Speaker 2: get paid is about to change As of the first
Speaker 2: of July, the minimum amount of super YEW received is
Speaker 2: about to increase. So what does this actually mean for you?
Speaker 2: We will explain in today's podcast before we dive into
Speaker 2: today's topier. As it would have heard at the top,
Speaker 2: this podcast is sponsored by Super Members Council, but they
Speaker 2: have had no influence over the editorial content of this episode.
Speaker 1: Before we get into the changes to super, I think
Speaker 1: we should first explain what super actually is, because it's
Speaker 1: something that impacts everybody. You know, at the very least
Speaker 1: you're giving your super details to your employer, but perhaps
Speaker 1: especially for younger people, we don't stop and actually have
Speaker 1: it properly explained. Take us through the fundamentals of this.
Speaker 2: So super annuation, or we more commonly refer to it
Speaker 2: as super is a way of saving for retirement that
Speaker 2: is compulsory in Australia. You can kind of think of
Speaker 2: it like forced savings. I think that's a good way
Speaker 2: to think about it. And what it means is that
Speaker 2: employers are required by law to pay a percentage of
Speaker 2: your wages into an account, which is your super fund,
Speaker 2: which is then invested over time to help you build
Speaker 2: up savings for when you stop working. I often hear
Speaker 2: people say, oh, I don't invest in shares. A response
Speaker 2: to that can be, well, you probably do if you
Speaker 2: have a super account, which we all do.
Speaker 1: And the idea behind that is if you have ten
Speaker 1: dollars in a super account in twenty twenty five, you
Speaker 1: can make that ten dollars work harder for you by
Speaker 1: the time you're sixty five in thirty forty years, that
Speaker 1: ten dollars is hopefully twenty dollars exactly. And what's the
Speaker 1: history of this scheme?
Speaker 2: So it hasn't been around for as long as you
Speaker 2: might think. It was introduced as a compulsory payment in
Speaker 2: nineteen ninety two by Paul Keating's government, and that means
Speaker 2: that people retiring now likely haven't actually had a super
Speaker 2: account for their entire working lies, unless of course, they
Speaker 2: were voluntarily putting money into a super account before nineteen
Speaker 2: ninety two. Now, when it was introduced, the World Bank
Speaker 2: described Australia as actually being at the international forefront of
Speaker 2: policies to address the cost of aging.
Speaker 1: And that's important, right because now we're kind of getting
Speaker 1: in to the why the why supers there.
Speaker 2: Yes, that is the key point. That super has everything
Speaker 2: to do with how to deal with the economic needs
Speaker 2: of an aging population.
Speaker 1: So you're saying that they can then have a pile
Speaker 1: of money to lean on, exactly, So spell that out
Speaker 1: for me, what exactly do you mean by that?
Speaker 2: So the idea is that if people have more savings
Speaker 2: when they retire, then they won't need to go on
Speaker 2: the age pension, which is taxpayer funded. So therefore, in theory,
Speaker 2: it reduces the burden on governments, and that is something
Speaker 2: that governments around the world are dealing with. As people
Speaker 2: live for longer, there is more of this drain on
Speaker 2: government resources, and so the question that governments around the
Speaker 2: world are grappling with is how do we set people
Speaker 2: up so that less people are in need of government support.
Speaker 2: It's kind of this funny thing where you think, oh,
Speaker 2: it's great that people are living for longer and life
Speaker 2: expectancies are increasing, but that does come with economic challenges,
Speaker 2: and that is exactly what super is trying to address.
Speaker 1: It's interesting that it's framed as you don't know yet
Speaker 1: that you're going to need this later, yeah, but you will, yes,
Speaker 1: So we're going to think decades ahead for you, even
Speaker 1: though let's be honest, probably younger people would want more
Speaker 1: money in their paychecks. What does it mean though for
Speaker 1: an average person today?
Speaker 2: So today, it means that it is mandatory for your
Speaker 2: employer to pay a percentage of your wage into.
Speaker 1: Your superfund, so it doesn't pass through your bank account,
Speaker 1: it goes straight to the fund. That's right.
Speaker 2: And so at the moment that percentage is eleven point
Speaker 2: five percent. So let's say that you're earning seventy thousand
Speaker 2: dollars a year, your employer needs to be putting a
Speaker 2: minimum of about eight thousand dollars into a super fund
Speaker 2: for that year.
Speaker 1: And so, Billy, is that amount of money that your
Speaker 1: employer is paying for your super is that on top
Speaker 1: of your salary.
Speaker 2: It actually depends on your employer whether it's on top
Speaker 2: of or part of. So you always get paid super.
Speaker 2: That is consistent amongst every company. But some companies advertise
Speaker 2: the salary excluding super and then some advertise it including Super.
Speaker 2: So you have to make sure that you understand if
Speaker 2: the figure that you're presented with in your contract includes
Speaker 2: or excludes SUPER, and it will mean a different amount
Speaker 2: of take home pay. So the amount of pay that
Speaker 2: you see today. And so if we go back to
Speaker 2: the example of earning seventy thousand dollars a year, if
Speaker 2: it's excluding SUPER, then that's when it means there will
Speaker 2: be another eight thousand dollars that you don't see today,
Speaker 2: but that is going into your super account. Or if
Speaker 2: it's including Super, then your take home pay is closer
Speaker 2: to the sixty thousand dollars mark and the rest is going.
Speaker 1: Into super Okay, So it's basically reading the fine print
Speaker 1: and working out whether the eleven point five percent is
Speaker 1: on top of or including into that payment. What else
Speaker 1: do we need to know about how super works because
Speaker 1: I often see comments from people that are tapping into
Speaker 1: some of the more complex parts of super.
Speaker 2: Well. One thing is that you can act actually make
Speaker 2: voluntary contributions. So we talk a lot about the mandatory
Speaker 2: contributions that your employer needs to make, but if you
Speaker 2: want more SUPER in your account, then you can make
Speaker 2: voluntary contributions. You can sacrifice part of your salary and
Speaker 2: you can either do that individually, or you can say
Speaker 2: to your employer, I want you to put more of
Speaker 2: my salary into this super fund.
Speaker 1: And I guess that's the ultimate long term gratification. If
Speaker 1: you're putting more in, when can you access this kind
Speaker 1: of hidden treasure chest of super savings?
Speaker 2: So the current rules are that you can access your
Speaker 2: super if you're between sixty and sixty four and have
Speaker 2: stopped working so have basically retired, or if you're sixty
Speaker 2: five and older even if you're still working and that
Speaker 2: age has changed over time as the age of retirement.
Speaker 1: Interesting crease. I wonder if you know, in one hundred
Speaker 1: years in the future, is medicines better, technology is better?
Speaker 1: Whether the super age could even be higher than that?
Speaker 1: Would we have a superage of eighty?
Speaker 2: Yeah, so interesting. I imagine sooner than in one hundred
Speaker 2: years it will increase.
Speaker 1: Okay, And the reason why we're talking about all of
Speaker 1: this today is because we have this end of financial
Speaker 1: year deadline of the first of July coming up next week,
Speaker 1: and that's when super is changing. Talk me through those changes.
Speaker 2: Yes, so it's kind of a mandated pay increase for everyone.
Speaker 1: Well, how about that? Yes, how about that?
Speaker 2: So as of the first of July this year, your
Speaker 2: employer will be required to put in twelve percent of
Speaker 2: your salary, which is up from the eleven point five
Speaker 2: percent I was talking about before. And you might be wondering,
Speaker 2: what does that actually mean for me? The zero point
Speaker 2: five percentage point increase alone could see a typical thirty
Speaker 2: year old retire with twenty two thousand more in their
Speaker 2: super account. Now, what you might not know is that
Speaker 2: this increase that we're seeing in July, there have actually
Speaker 2: been a number of increases over the past few years.
Speaker 2: This is the final increase that is happening, so it's
Speaker 2: kind of going to stay at this level of twelve
Speaker 2: percent for a while.
Speaker 1: So from July two thousand and two until the thirtieth
Speaker 1: of June twenty thirteen, the super eight was nine percent.
Speaker 1: There's been a gradual increase from twenty thirteen, so it's
Speaker 1: been kind of staggered over time, and it's quite a
Speaker 1: big increase. That's three percent more from twenty thirteen.
Speaker 2: But just to give you one more number and then
Speaker 2: I promise we'll stop giving you all the numbers that
Speaker 2: taken together with the full increase from nine percent to
Speaker 2: twelve percent over the past decade, that could add up
Speaker 2: to more than one hundred thousand dollars in your superannuation
Speaker 2: savings by retirement because of all those increases.
Speaker 1: And this isn't the only change that's coming to super
Speaker 1: There's been a lot of news about superbalances that are
Speaker 1: more than three million bucks.
Speaker 2: Yes, although important to note that this isn't necessarily a
Speaker 2: definite change because it hasn't passed parliament yet. This is
Speaker 2: our proposal from the current government, but they haven't introduced
Speaker 2: the legislation and had it passed parliament yet. But essentially
Speaker 2: the government has announced a policy to increase taxes on
Speaker 2: earnings on super balances over three million dollars. Before I
Speaker 2: explain this, I need to explain how supers are taxed,
Speaker 2: which we haven't yet discussed.
Speaker 1: Okay, so that's interesting. It's a form of income, I guess.
Speaker 1: So it's money that you are receiving from your employer,
Speaker 1: and so it is taxed.
Speaker 2: It is taxed, but it's actually taxed at a lower
Speaker 2: rate than your regular income. So as a general rule,
Speaker 2: the money that goes into your super annuation is taxed
Speaker 2: at a rate of fifteen percent, and that is lower
Speaker 2: than all current income tax brackets. So you're paying less
Speaker 2: tax on your super than you are on your regular income,
Speaker 2: which is why some people might do those voluntary contributions
Speaker 2: from their employer because it is taxed less. Now, that
Speaker 2: is what Labor has proposed to change for the money
Speaker 2: earned on super balances over three million dollars, that it
Speaker 2: wants to increase the taxes for those accounts. Treasurer Jim
Speaker 2: Charmers said is that those balances are beyond what is
Speaker 2: necessary to fund a comfortable retirement. So basically, if the
Speaker 2: whole idea of this is to make sure that you
Speaker 2: have enough money to retire, more than three million dollars
Speaker 2: is more than enough for you to live a comfortable retirement,
Speaker 2: and so we're just going to tax the earnings of
Speaker 2: those balances a little bit more.
Speaker 1: And to take that one step further, their rationale would be,
Speaker 1: we're going to tax that a little bit more because
Speaker 1: you can probably afford it if you're in that position,
Speaker 1: and that money will then be used to fund government activities,
Speaker 1: which could include everything from health, education, roads, defense, whatever
Speaker 1: the government needs to spend money on exactly.
Speaker 2: Now there is more detail to it, and there is
Speaker 2: also some criticism of the policy. The opposition, for example,
Speaker 2: is against it. I don't know if it's worth getting into,
Speaker 2: partly because it is quite a small percentage of people
Speaker 2: that this increased tax, if it does pass, will apply to.
Speaker 1: And I'm sure quite a smaller percentage of people who
Speaker 1: would be young people.
Speaker 2: Who I genuinely don't know if any young people would
Speaker 2: have that amount in their super account.
Speaker 1: If those tech billionaires that we talked about on Friday
Speaker 1: had super funds, if they were Australian, maybe it will
Speaker 1: apply to them.
Speaker 2: It would definitely apply to one hundred.
Speaker 1: Million dollars signing busus is. But yeah, i'd say overall
Speaker 1: this is kind of a topic that doesn't necessarily impact
Speaker 1: a whole heap of young Australians.
Speaker 2: Well, I have the exact number of how many Australians
Speaker 2: overall it impacts. So ninety nine point five percent of
Speaker 2: Australians currently don't have more than three million dollars in super,
Speaker 2: So at the moment, this policy would only apply to
Speaker 2: zero point five percent of Australians of all ages.
Speaker 1: Okay, So I feel like if we look at the
Speaker 1: two things that we discussed today, that three million dollar
Speaker 1: super tax change that's going to go through Parliament, you'll
Speaker 1: see that in the news, and it's good to be across, But.
Speaker 2: The main definitely going to go through parliament.
Speaker 1: Sorry, well, it will be tabled in Parliament, they'll have
Speaker 1: their big discussions and probably do some shouting and then
Speaker 1: we'll see what happens. But the big change that I
Speaker 1: think it is important for young people to be across
Speaker 1: is this increase from July and the minimum amount of
Speaker 1: super that we're all entitled to as Australians is going
Speaker 1: up and that is a really important part of our
Speaker 1: economic system that we're all participants in to be aware
Speaker 1: of and to chat through.
Speaker 2: Absolutely, I look forward to seeing it my super account.
Speaker 1: You know what you're worth thirteen percent?
Speaker 2: Oh oh thanks Sam, Oh gotcha, we've got it on records.
Speaker 2: I'll just send this back to you.
Speaker 1: Okay, that's a slightly awkward way to end podcast, but
Speaker 1: you know what, there's nothing like a bit of negotiation
Speaker 1: on air. That's all I've got time for your Sunday
Speaker 1: special super episode of Daily Ods. Thank you so much,
Speaker 1: Billy for taking us through that, and thank you for
Speaker 1: listening to this part. It's a really good way to
Speaker 1: keep in touch with those things that you feel like
Speaker 1: you probably should have learnt in school, but maybe skip
Speaker 1: to day and we're always here to take you through
Speaker 1: the parts of your pay package and the parts of
Speaker 1: your life that always needs a little bit more explaining.
Speaker 1: We'll be back again tomorrow morning with another d dive.
Speaker 1: Until then, have a beautiful Sunday.
Speaker 2: Bye.
Speaker 3: My name is Lily Maddon and I'm a proud Arunda
Speaker 3: Bunjelung Calcutin woman from Gadighl Country. The Daily oz acknowledges
Speaker 3: that this podcast is recorded on the lands of the
Speaker 3: Gadighl people and pays respect to all Aboriginal and Torres
Speaker 3: Strait Island and nations. We pay our respects to the
Speaker 3: first peoples of these countries, both past and present.
Speaker 1: Want to understand your super and how it's working for you,
Speaker 1: head to Smcaustralia dot com. Super Members Council is here
Speaker 1: to protect your savings now and into retirement.