It is great to see the removal of the $450 Superannuation threshold effective from 1 July 2022, which has been advocated for many years, with the passing of the Treasury Laws Amendment (Enhancing Superannuation Outcomes For Australians and Helping Australian Businesses Invest) Bill 2021. Although this change is long overdue, it has several shortcomings.
The original rationale for the $450 threshold was to minimise the burden on employers administering small amounts of superannuation contributions and help prevent the creation of low-balance accounts that fees and insurance premiums would erode. As a result of many Legislative provisions, combined with SuperSteam and Single Touch Payroll, these changes have driven significant digitisation by Businesses to meet their legislative obligations, dramatically diminishing the administrative burden of Superannuation Guarantee (SG).
Incremental efforts with changes to SG still haven't gone far enough. Removing the $450 rule is an excellent step toward ensuring workers are paid super on every dollar earned.
If you are under 18 and work 30 hours or less per week, the apparent shortcoming is that you miss out on super.
A crucial change required is to abolish the age and hours rule with the goal of Superannuation being paid for all payments regarding ordinary hours worked. To penalise a subset of employees diminishes the benefits of Superannuation and the reasoning behind its introduction. When young people start working and earning an income, they should be entitled to superannuation.
DSPs have significant challenges in implementing the removal of the $450 Superannuation threshold.
The ATO guidance states that SG will be calculated once the 30 hours are exceeded. One issue arises in determining hours "employed to work" concerning SGD 93/1. If an under 18 employee typically performs 25 hours per week but works 6 hours overtime, they have exceeded the 30 hrs/wk threshold, and SG is to be calculated on Ordinary Time Earnings (OTE). One challenge for DSPs is determining what pay components represent "hours worked" used for the calculation. This rule also applies to Domestic or private workers irrespective of their age.
Additionally, the guidance does not consider performing an average calculation if the employee is paid other than weekly. Calculations are only to be performed on a per-week basis.
e.g. Employee paid Fortnightly and performs,
Week 1
25 Ordinary Hours (OTE) + 2 hours Time and Half + 4 hours Double Time = 31 hours actually worked
Week 2
25 Ordinary Hours (OTE) + 2 hours Time and Half = 27 hours actually worked
In the simple example above, SG will only be calculated for Week 1 as the threshold was exceeded but not for Week 2. Further, SG will only be calculated on 25 hours (OTE) for Week 1.
Implementing this rule can be a programmatic nightmare for DSPs, depending on the structure of their current solution, or, at the very least, challenging.
The future is for the Superannuation Guarantee to be paid more frequently by Employers.
It is reasonable but difficult to administer in principle without significant change to the current system, as many employers already pay their Superannuation obligations every calendar month. I'm sure anybody who has made a genuine mistake and overpaid super has experienced the onerous (or non-existent) process of attempting to retrieve the overpayment from the Superannuation Fund. If the expectation is that employers pay Superannuation more frequently (every pay period), the Government must Legislate a simple method for the return of contributions paid in error. This change would force a uniform process facilitating the return of funds irrespective of the Superannuation Fund. This solution may take a form similar to the existing ATO process to recover PAYGW amounts withheld in error in the current financial year.
Since the introduction of the Superannuation Guarantee, significant benefits have been realised. However, changes are still required to ensure that all employees are correctly paid Superannuation every pay period.
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