Low income earners, women and older Australians will benefit from the passing of two bills in Parliament at the eleventh-hour before the federal election.
The Treasury Laws Amendment (Enhancing Superannuation Outcomes For Australians and Helping Australian Businesses Invest) Bill 2021 passed on Thursday (February 10), removing the $450 monthly threshold to be earned by workers before employers contributed to their super.
Compulsory payments will now begin from July 1 for an estimated 300,000 low-income earners, 63 per cent of whom are believed to be women.
A long-awaited amendment, promoted in last May’s budget, gives flexibility for Australians aged 67 to 75, to make non-concessional super contributions under the bring-forward rule, said superannuation minister Jane Hume. The amendment repealed the work test for non-concessional and salary sacrificed contributions. The test allowed only people gainfully employed for 40 hours or more in any 30-day period in a financial year to contribute.
Both bills passed on the final sitting day of both houses of Parliament before an anticipated May election.
Outdated structural feature
The threshold was an “outdated structural feature” of the super system and its removal would improve equity, delivering on a promise in this year’s Women’s Budget Statement, Hume said in a statement.
Australian Institute of Superannuation Trustees (AIST) chief executive Eva Scheerlink said removing the threshold was an “important equity measure”.
“(It will) make an immediate difference to the retirement outcomes of some of Australia’s most disadvantaged workers, including women, who make up two out of three of those impacted, many of whom work in two jobs just to make ends meet,’’ she said.
However more needed to be done to address gender inequity in super savings including an introduction of payments for paid parental leave and no changes to an expected increase in the Superannuation Guarantee to 12 per cent, she added.
More needed to address gender equity
Health and community workers’ industry fund HESTA, with 80 per cent of its members women, welcomed the move but said more was needed to address the super system gap.
HESTA chief executive Debby Blakey said the threshold had disproportionately impacted women who are more likely to work in multiple part-time or casual jobs for 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 said.
“The long overdue removal of this threshold will ensure that they’ve now got a better opportunity to enjoy a more financially secure retirement.
“The fact that super continues not to be paid on parental leave remains an obvious gap in our super system that needs to be addressed.”
Poor retirement savings related to insecure work
Overdue changes to the monthly threshold would stop $59 million in super being withheld from low-paid workers each year said ACTU president Michele O’Neil.
“Poor retirement savings are directly related to insecure work and gig work, with some workers not being paid super at all under the $450 restriction despite working multiple jobs,’’ she said.
Meanwhile superannuation funds will now provide a retirement income strategy to older Australians from July 1 under the new Retirement Income Covenant, embedded in the Corporate Collective Investment Vehicle Framework and Other Measures Bill 2021.
This would assist super fund members to make informed decisions about how to use their savings, said Association of Superannuation Funds of Australia (ASFA) chief executive Martin Fahy.
“With a maturing super system, we expect to see a greater proportion of retirees relying less on the Age Pension and more on their superannuation,’’ he said.
“It is important that members are assisted to make informed decisions about how to use their super savings to increase their standard of living in retirement”