We must scrap the $450-a-month income threshold that is excluding a growing number of casual and contract workers, a disproportionate number of whom are women, from our world-class compulsory superannuation system.
It’s commonly said that Australia’s super system is the envy of the world. Successive governments, looking down the barrel of an ageing population over the past 25 years, have supported a mandatory, concessionally taxed savings scheme to reduce reliance on the age pension and, ideally, replace it with income from private savings.
As enviable as our superannuation scheme is, however, it is not perfect. It remains the responsibility of government
to review the operation and application of policy constantly to ensure that we are best serving all Australians, by providing them the opportunity to save adequately for retirement.
There are elements of the scheme that need urgent attention; most notably, the $450-a-month income threshold
before workers are eligible for guaranteed 9.5 per cent superannuation contributions via their employer.
As it stands, if an employee earns less than $450, before tax, in a calendar month, an employer is not obligated to accrue and pay any superannuation on their behalf. This is regardless of the employee’s classification and even if the employee has multiple jobs for which their overall income exceeds the threshold.
It is increasingly common for individuals to earn income from multiple jobs. This means a growing number of workers who overall earn significantly more than the $450 a month receive no superannuation guarantee payments, because the obligation is never triggered for any of their employers.
In a modern economy, the $450-a-month threshold for the super guarantee represents a failure of government to keep superannuation in line with its intended policy outcomes.
Women worse off
Of great concern to me is the disproportionate effect that the threshold has on certain sectors of Australian society, including low-income earners and, in particular, women. In industries such as retail, hospitality and nursing, which female workers dominate, many employees are excluded from the super guarantee system in spite of their aggregate income exceeding the threshold.
The $450-a-month minimum gives rise to the opportunity for unscrupulous employers to game the system by deliberately employing large numbers of staff for a few hours each, thereby reducing their payroll liability by remaining under the threshold for each employee. This is a perversion of policy that systematically discriminates against those who work few hours due to their responsibility as carers or work in industries with a largely casual workforce.
Superannuation policy and payroll systems have come a long way in the past decade. With the introduction of the Australian Taxation Office’s clearing house for small-business superannuation transactions, the excuse that small amounts of superannuation are an unnecessary administrative burden to businesses no longer holds up.
The $450-a-month income threshold is a relic. It is no coincidence that $450 a month extrapolated to a yearly income is $5400. This was the tax-free threshold in 1992, the year compulsory superannuation was introduced.
The tax-free threshold in 2017 is $18,200, yet the income threshold for the compulsory payment of superannuation
guarantee has not changed in 25 years. This makes no sense.
As the government works towards a mature superannuation system – one that allows Australians to generate
a retirement income from private savings that can supplement or substitute the age pension – it must amend
the Superannuation Guarantee (Administration) Act 1992 to remove the $450-a-month income threshold and allow super to be accrued from the first dollar earned.
Jane Hume is a Liberal Senator for Victoria and chair of the Senate Economics Legislation Committee. Prior to her election in July 2016, Hume held senior executive roles at AustralianSuper, Deutsche Bank and Rothschild Asset Management.