loader image

Home > Blog > Super guarantee minimum threshold removed

Super guarantee minimum threshold removed

Date: 31 March 2022

In Australia, it is estimated that around 300,000 young, part-time, mostly female workers currently and legally do not receive super contributions from their employers under the super guarantee scheme. This is due to their before-tax earnings per month falling below the minimum $450 threshold for making contributions. All this is set to change from 1 July 2022, when the minimum threshold will be scrapped. This means that low-income earners currently under the threshold will finally have a chance to build their super for retirement.

Example

Stuart is studying at university part-time and working part-time with three different employers (a café, a clothing retailer, and a bookseller). Over a month, Stuart makes $400 before tax with each employer. Even though he had made $1,200 before tax at the end of the month, his earnings with each employer were below the $450 threshold, and no super guarantee amounts would have been made on his behalf to his employer’s super fund.

While the original rationale for the minimum threshold was to reduce the administrative burden on employers having to deal with and pay a small amount of super guarantee, the digitisation of payroll systems has made the original rationale redundant. Coupled with measures that prevent the erosion of low-balance accounts – such as capped administration and investment fees and insurance charges for inactive accounts – low-income earners, those working part-time and other workers currently under the threshold will have a chance to build their super for retirement.

Practically, what this change means for employers is that, from 1 July 2022, regardless of what each employee makes each month, that amount of before-tax salary and wages will be used as a basis to calculate the amount of super guarantee that the employer is obliged to pay every quarter.

The super guarantee percentage will be 10.5% for the 2022-23 income year (i.e. 1 July 2022 to 30 June 2023) when the minimum threshold is removed.

In the example of university student Stuart, if he continues to make the same amount (i.e. $400 per month with each employer on an ongoing basis), from 1 July 2022, each of his employers will be required to contribute $42 per month to his super ($400 x 10.5%). If they pay super guarantee quarterly, Stuart should be getting $378 each quarter from all his employers. Over a year, $1,512 in super guarantee contributions will be made to his super fund, which he would not have received before the minimum threshold removal.

For low-income earners, the beneficial removal of the minimum threshold for paying super guarantee will be further compounded by the planned increases in the super guarantee rate over the next few years (i.e. 11% for the 2023-24 year, 11.5% for the 2024-25 year, finally reaching 12% in the 2025-26 income year). This will mean even more super for retirement.

Super for your retirement.

Many people fail to pay enough attention to their super as retirement always seems a long way away. But every little bit counts in retirement, and we can help. Whether ensuring your employer is paying the right amount of super to help you recover lost super, we have the expertise. Contact today via enquiries@rm.net.au

**The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.

Start today

To discuss with one of our estate planning experts. Start by emailing us at enquiries@rm.net.au

Contact Us +

Know More

NSW First home buyer property tax

NSW First home buyer property tax

From Saturday 12 November 2022 first home buyers can opt in to pay an annual property tax rather than stamp duty when buying their first home. The Bill to introduce this measure has completed its passage through NSW parliament and received assent today [Friday 11...

read more
Are Your Contractors Employees?

Are Your Contractors Employees?

Two landmark cases before the High Court highlighted the problem of identifying whether a worker is an independent contractor or employee for tax and superannuation purposes. Many business owners assume that they will not be responsible for PAYG withholding,...

read more
Succession planning – NSW farming families

Succession planning – NSW farming families

The stamp duty exemption for farms in NSW has recently been broadened and will greatly increase the succession planning options available to families in the rural sector.   The past exemption for transferring farming properties between generations requires the...

read more