Mining Tax Repeal Causes Pause On SG Increases

The Federal Government lauded the much-promised mining tax repeal, which took effect in September 2014, as something which may save the Budget around $50 billion over the next decade.

This saving includes an amount of $2.5 billion over the forward estimates by re-phasing the Superannuation Guarantee (SG) increase; CANSTAR’s superannuation calculations show that it will hit the retirement nest egg of the average 30 year-old worker by around $20,000 – $40,000 depending on their current income level.

The background to the SG increase

As background, the Gillard Federal Government announced, in September 2010, that the rate of SG payable by employers would increase from its then-level of 9% to a rate of 12%, increasing in increments between 1 July 2013 and 1 July 2019.

In the May 2014 Federal Budget, the current Federal Government had already announced superannuation changes and delayed the increase in SG payments. As part of the mining tax repeal it has legislated an additional three-year freeze. Based on that, workers will not receive the full 12% SG rate until 1 July 2025.

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What difference would a 12% SG make to your superannuation?

Currently the SG rate is 9.50% – what difference would it make to your retirement nest egg if that rate was currently 12%? That answer will differ from person to person of course, and depends on a range of factors including:

  • Your annual income
  • The number of years between now and retirement
  • Your current superannuation fund balance
  • The return on your super fund
  • The fees you pay on your super fund
  • Any career breaks or other changes in income between now and retirement

Still we can use a superannuation calculator do a few general calculations based on a: “all other things remaining equal” scenario, to give a general indication of the difference a 12% SG rate might make by the time you retire.

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Example 1:

A worker on a current income of $60,000 per annum, with 30 years between now and retirement. A current superannuation fund with $20,000, and an annual return of 7% after all fees and tax. Without taking any inflation into account, the worker might expect a retirement nest egg after 30 years as follows:

  • $724,000 at a contribution rate of 9.50%
  • $750,236 at a contribution rate of 12.00%

The worker would have an extra $26,236 in their super at retirement.

Example 2:

All other assumptions remaining the same, a worker on a current income of $90,000 might expect a retirement nest egg after 30 years as follows:

  • $1,010,500 at a contribution rate of 9.50%
  • $1,050,000 at a contribution rate of 12.00%

Of course, you don’t need to wait for the government to enact legislation; there can be many benefits to contributing additional funds to superannuation by yourself. Try our superannuation calculator to see what impact you could make to your own retirement savings.

So how will that additional three year “pause” affect retirement nest eggs?

The table below shows the projected impact for a 30 year-old worker planning to retire at age 65, and assumes a salary increase of 3% per annum.

Current Income Annual return net of fees/tax Retirement balance pre-SG freeze (future dollars) Retirement balance post-SG freeze (future dollars) Difference
$30,000 7% $1,100,000 $1,086,000 -$14,000
$40,000 7% $1,289,000 $1,270,000 -$19,000
$50,000 7% $1,478,000 $1,454,000 -$24,000
$60,000 7% $1,667,000 $1,638,000 -$29,000
$70,000 7% $1,856,000 $1,822,000 -$34,000
$80,000 7% $2,045,000 $2,006,000 -$39,000
Source: CANSTAR. Assumes salary indexation of 3% per annum and retirement at age 65.

While the SG freeze will undoubtedly affect the retirement nest egg of workers, you should still ensure that you’re as super-savvy as you can be. Here are some things you should look for in a great-value super fund.

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Compliance Disclosure and Liability Disclaimer

Sponsored products displayed are paid advertisements and Canstar receives a fee for referring you to the advertiser. Past performance is not necessarily a guide to future performance; unit prices may fall as well as rise. Performance information shown is for the historical periods up to 30/06/2016 and investment options noted in the product information. Performance figures shown reflect net investment performance, i.e. net of investment tax, investment management fees and the maximum applicable ongoing management fees and membership fees. Performance information is provided by Rainmaker Information Pty Ltd ABN 86 095 610 996 AFSL 461816 ( which provides general information on superannuation. Any advice on this page is general and has not taken into account your objectives, financial situation or needs and is not a recommendation for your particular circumstances. Consider whether this advice is right for you. Consider the product disclosure statement before making a purchase decision. You may need financial advice from a qualified advise

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