The Federal Government is preparing to dump a planned rise in compulsory superannuation that would add $20 billion a year to employers’ wage bills.

Under the previous Labor Government, the super guarantee levy was scheduled to rise from 9 to 12 percent of salaries as part of the 2010 mining tax. This would be paid by employers.

The Abbott Government postponed the policy as part of its undoing of the mining tax, but the levy has already increased to 9.5 percent. It is due to rise to 10 percent in 2021 and 12 percent in 2025.

The Government has proposed abandoning any further rises, saying it will be too costly to implement and won’t do enough to build the retirement savings for millions of workers.

Cancelling the rise would cut billions of dollars from the federal budget and save employers significantly. The Government says it could also help fund income tax cuts, something it is determined to do.

Treasury officials say the Government could save billions of dollars by scaling back the tax concessions on super. Budget costs associated with the super guarantee levy could lead to further savings.

Prime Minister, Malcolm Turnbull, and Treasurer, Scott Morrison, are concerned the levy will hurt the budget and won’t produce the benefits Labor claimed it would achieve, namely building up private savings and reducing reliance on the Age Pension.

The Government believes the forced contributions to super do little to benefit low-paid workers. Because the levy effectively comes out of today’s wages, workers make less money now and still rely on the Age Pension later. Most workers receive the full pension after they retire.