UNIONS have launched a rare attack on the Gillard government's superannuation regime, out of fears that draconian tax penalties are preventing blue-collar workers saving more for their retirement.
Urged by their members to get the system changed, union leaders are seeking reforms in the May budget that would allow workers to salt away the "once-in-a-lifetime" pay hikes they enjoy from the resources boom.
The union campaign highlights the impact of the surprise cap on employee super contributions in May 2009, billed as a way to stop the richest Australians unfairly minimising their tax.
The impact is now being felt by skilled tradespeople working in the resources sector as their salaries rise to levels they never expected, giving them a chance to make extra contributions to their super accounts.
The Communications Electrical and Plumbing Union, the Electrical Trades Union and the Maritime Union of Australia have warned that the caps are so low that workers cannot contribute enough to their super, putting their retirement incomes at risk.
Financial Services Minister Bill Shorten said last week he was having "productive discussions" about the caps at the super roundtable he has with industry experts.
The caps allow employees to take advantage of a concessional 15 per cent tax rate on superannuation contributions up to a limit of $25,000 per year including employer contributions, salary sacrifice contributions and one-off payments into a super account.
Those who exceed the cap lose the concession and can end up paying 46.5 per cent tax on every dollar they contribute over $25,000. A higher cap of $50,000 applies to those older than 50.
CEPU national secretary Peter Tighe labelled the caps "silly" and said they should be replaced with rules that allowed workers to contribute more for a few years.
"We'd rather see the money saved than see it absorbed into the tax coffers when someone has moved into a higher earnings bracket for a few years," he said.
"I think the government would be silly not to investigate the idea."
Mr Tighe said the super regime was too rigid for workers enjoying the proceeds of the mining boom and the government could gain community support by giving ground on the rules. MUA national secretary Paddy Crumlin said his members should be able to put more aside without incurring penalties. "We don't think those of our members who want to save responsibly for some dignity in retirement should be penalised," he said.
"Our members do precarious work and we all know that the good times won't last forever."
Australian Taxation Office figures show that 69,000 people have been caught off-guard by the decision to cut the general cap from $50,000 to $25,000, leading to a big increase in tax penalty notices. The figures show that 61 per cent of those who incur the excess contributions tax are from low- and middle-income brackets.
The caps stopped electrician Phil Harrington from putting aside more for his retirement as he worked on some of Queensland's biggest mining projects. "I was looking at putting in more but then saw that I'd be taxed again," said Mr Harrington, 47, who flies out on Sunday to his next job, at the Goonyella Riverside coal mine owned by BHP Billiton and Mitsubishi. Mr Harrington, who earns about $200,000, says his jobs can run for six months or two years and that he would like to use this period to prepare for retirement.
"My objective is to build up the super so I can enjoy a better retirement, when my wife and I want to travel and see more of the country," he said. "You always worry that you're not going to have enough there in the end, so I'd like to have what I need to enjoy my retirement. It would depend on the job I have at the time and how long it's going for, but I'd definitely like to contribute more."
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