Aussies on low incomes get a boost to their super

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In a long-awaited move, the government has scrapped the $450 superannuation guarantee threshold, making about 300,000 people eligible for super contributions.

The bill to remove the monthly income threshold was passed in Parliament yesterday, alongside the Retirement Income Covenant and the Corporate Collective Investment Vehicles regime.

From July 1, 2022, all employers must pay superannuation guarantee contributions on all earnings, no matter how little each month.

super 450 threshold removed low income earners

The government first announced it would scrap the $450 threshold in last year's federal budget, handed down in May. However, the legislation to do so was delayed for much of the year and, due to be considered in the final week of parliamentary sitting for 2021, was ultimately cast aside before being picked back up yesterday; further penalising the estimated 300,000 people who earn less than $450 a month, primarily women.

The threshold currently stands even if an employee earns more than $450 in a month, but the income is derived from more than one part-time or casual job.

As such, the removal of the measure was welcome news for the superannuation industry, which described the threshold as anything from inequitable to arbitrary and illogical.

Commenting on the move, Super Consumers Australia director Xavier O'Halloran says: "Scrapping this dinosaur rule is a step towards making super fairer."

He added that the threshold "was a relic of a previous era before digital payrolls, and any justification for it remaining had long passed".

Meanwhile, Aware Super chief executive Deanne Stewart says: "The threshold was arbitrary and illogical. It punished hundreds of thousands of low-income Australians in part-time and casual work - including young people finding their feet in the workforce and casual employees in the gig economy - short-changing them of valuable retirement savings."

And HESTA chief executive Debby Blakey says the requirement to earn $450 per month with one employer before you get paid super has compounded financial insecurity for casual and part-time workers, who often have lower pay and are in insecure or precarious work.

"More than 80% of our members are women. Women are more likely to work in multiple part-time or casual roles with different employers. The result is that they can totally miss out on the benefits of super, which leaves them more vulnerable to poverty as they age," she says.

The next step is to further lobby for SG contributions to continue while on parental leave.

The removal of the threshold was contained in Treasury Laws Amendment (Enhancing Superannuation Outcomes For Australians and Helping Australian Businesses Invest) Bill 2021, which also contained two other key super reforms.

Also effective July 1, the eligibility age for the super downsizer scheme will be lowered to 60 from 65 and the super contribution work test for those aged 67 to 74 will be removed, allowing older members to continue building their savings.

This article first appeared on Financial Standard

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Jamie Williamson is editor of Financial Standard. Prior to this she was a senior journalist, covering wealth management including financial advice, superannuation and life insurance. Before turning to journalism, she worked in public relations, specialising in financial services. She has a Bachelor's degree in communications from the University of Newcastle.

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