Removal of the $450 threshold is excellent news for employees
Employees can retire with more savings now.
By means of passing the bill in the parliament, the government of Australia has removed the super guarantee monthly threshold of $450 for the employers to contribute to the super guarantee funds of the employees. Now, employers will pay superannuation for all ordinary hours working from July 01, 2022.
Employers must provide a super guarantee to employees regardless of their monthly salary. At the same time, the super guarantee is rising to 10.5%. That means employers will contribute 10.5% of the employee’s salary to super contributions for the workers earning less than $450 pre-tax income per month.
On July the 5th, Superannuation Minister Jane Hume made a spontaneous statement on Twitter saying that removing the “discriminatory, inequitable relic” will make “a real difference” to thousands of workers.
The Background:
Treasury department of the Australian government reviewed the income disparity and cost of living going high due to global energy disruptions and Covid. As a result, a 2020 Retirement Income Review Final Report became a base for the government to eliminate the threshold.
The report noted that over 300000 employees, or almost 3% of the workforce, aren’t getting a super guarantee because they do not earn a $450 monthly income. These class mainly includes part-timers, low-income workers and young employees. Two third of these people are women. Therefore to provide them with the kind of social security needed, the government came up with a solution of removing the threshold.
What Has Changed?
All employees above 18 are entitled to a Super Guarantee from the employer even though their monthly income is less than $450.
Employees under the age of 18 will be required to work 30 hours weekly to be eligible for the superannuation guarantee from the employers. Although, the $450 threshold also doesn’t apply to employees under 18.
What do Employers need to do?
Employers will require to contribute to a super guarantee fund for the employees even if their monthly salary is less than $450. However, there are other terms and conditions attached to it that every employee must fulfil to receive a super guarantee.
You need to do nothing in MYOB to cater for the threshold removal. The right amount of super will be calculated based on the payment, for example, if. If you hire employees under 18 and work less than or equal to 30 hours a week, the employer doesn’t need to contribute to their super for that week.
What should employees do?
Employees need to submit their superannuation fund details to the employer. Those who do not have a super guarantee so far can request ATO to provide Stapled fun details to ensure they receive superannuation from now on.
Until now, the accounting and payroll system automatically excluded employees with income lower than $450. Employees must ensure that their details are added to the payroll system.
Many contractors are “employees” for SG purposes. Therefore, employers should consider whether contractors will now be entitled to SG contributions.
Educate The Employees
Come 1 July, your employees eligible to receive super for the first time may have questions they need to be answered. In addition, employers may call in PND Accountants & Advisors to explain the new changes in the super guarantee to their employees.
Conclusion
“This legislation abolishes a significant inequity in our superannuation system, which directly penalises low-income earners and disadvantaged Australians, as found by the Retirement Income Review,” said Chirag Patel of PND Accountants & Advisors.
Employers may have to contribute more, but employees will be included in the social security net, especially those who were not getting any super guarantee until now. The move by the government will create a level playing field and is a necessary step in creating an equal retirement income system.
