19 June 2017
Get rid of the threshold – super should be for everyone
There is currently a $450-a-month wage threshold for the Superannuation Guarantee (SG) and as a result, an estimated 220,000 Australian females and 145,000 males are missing out on around $125 million of superannuation contributions each year.
The SG amounts to 9.5 per cent of your salary that, by law, your employer has to pay into your super fund.
It should be part of your work related entitlements. Low income Australians need SG too, to help put them on the road to comfort in retirement.
The Association of Superannuation Funds of Australia (ASFA) has lobbied previously for the removal of the $450 threshold, not least because it particularly affects women who often work in casual or part-time jobs for more than one employer at a time.
It also impacts young Australians in casual jobs. ASFA believes the current approach is delaying young people embarking on the super journey.
Having young people engaged in super saving as early as possible makes more sense than excluding them from a super start in their first job. Compounding of investment returns can turn small initial contributions into substantial amounts at retirement.
Casual and low paid workers in retail, hospitality and nursing are reportedly the hardest hit by being left out of super due to the threshold.
For a student aged 19 working part time for five years and earning $4,000 a year, missing out on SG means losing out on $1,900 in superannuation contributions.
For a woman aged 37 working part time due to family responsibilities and earning $5,000 a year, the loss over three years is $1,425. These are significant amounts.
ASFA CEO Dr Martin Fahy said removing the threshold would boost the retirement savings of many women as well as the young and it was about time for total equality with SG.
“When we are faced with glaring gaps in income and retirement equality for women in this country, any lever that can be pulled to help fix things should be pulled,” he said.
The majority of adult Australians have a superannuation account able to receive contributions.
Employers also now generally have automated processes to pay both salaries and superannuation contributions. It can be more work for employers to work out who is below the threshold.
“It’s also wrong to deprive part timers of what in effect is a part of the remuneration for the job they are doing,” Dr Fahy said.
“Employers do not top up the pay of those below the threshold for the missing super contributions.
“Removal of the threshold is a long overdue correction. As more and more people build portfolio careers around the gig economy, we need to move with the times and recalibrate SG to meet their needs.”
Regardless of whether you have a full time, part time or casual job, if you earn more than $450 (before tax) in a calendar month, your employer should currently pay super contributions for you.
“Everyone needs super,” Dr Fahy said.
“It’s time to level the field, give everyone the entitlement of super and strengthen the super system by removing any impediment to providing a fully universal means to build wealth.
“Australia’s $2.3 trillion super system is one of the top three retirement systems in the world.
“There is room to include everyone and we should be doing so as soon as possible.”
For further information, please contact:
Teresa Mullan, Media Manager, 0451 949 300.
ASFA is the peak policy, research and advocacy body for Australia’s superannuation industry. It is a not-for-profit, sector-neutral and non-party political, national organisation. ASFA’s mission is to continuously improve the superannuation system so people can live in retirement with increasing prosperity.