Updated: Jul 31, 2022
It is great to see the removal of the $450 Superannuation threshold effective from 1 July 2022, 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, there are 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, which has dramatically diminished the administrative burden of Superannuation Guarantee (SG).
Incremental efforts with changes to SG still don't go 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 less than 30 hours 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 in respect of ordinary hours worked. To penalise a subset of employees diminishes the benefits of Superannuation and the reasoning behind its introduction. The moment a young person starts work and earning an income they should be entitled to Superannuation.
There are significant challenges for DSPs in implementing the rule.
The ATO guidance states once the 30 hours are exceeded, SG is to be calculated. One issue arises in determining hours "employed to work" concerning SGD 93/1. If an under 18 employee performs typically 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 actually worked" used for the calculation. This rule also applies to Domestic or private workers irrespective of their age.
Additionally, there is no consideration in the guidance for 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,
25 Ordinary Hours (OTE) + 2 hours Time and Half + 4 hours Double Time = 31 hours actually worked
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.
Implementation of this rule is a programmatic nightmare for DSPs depending on the structure of their current solution or, at a minimum, challenging.
The suggestion of a Superannuation Guarantee being paid more frequently by Employers.
It is a reasonable idea 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), 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. There are still changes required to meet the objective of ensuring all employees are correctly paid Supererannation every pay period.