$450 Superannuation Guarantee scrapped in the Federal Budget? Is that a good thing?
It was announced in the 2021-22 federal budget that the government would scrap the $450 superannuation guarantee eligibility. This change is now a law and will take effect on July 1, 2022 (click here to read the announcement). As a result of this change, approximately 300,000 people will be eligible for super contributions. Therefore, employers will be responsible for paying superannuation guarantee contributions regardless of how little each employee earns. Read below to find out how the scrapped $450 superannuation guarantee in the federal budget is an appropriate measure.
Effect on employeesThis law will primarily benefit low-income earners, especially women who earn less than $450 a month. However, employees making more than $450 a month, even if the income is cumulated with more than one part-time or casual job, will be considered above the threshold. In addition, the bill will eliminate the work test for non-concessional and salary sacrificed contributions.
Effect on the superannuation industry
It will be a massive boost for the superannuation industry, which had long criticized the threshold as unfair and illogical. This is because it forbids thousands of low-income Australians from finding work, including young people entering the workforce as casual and part-time employees. Furthermore, the measure will lower costs, simplify reporting for small APRA-regulated funds, and extend the temporary full expensing deadline to June 30 2023.
A new rule will allow old age pensioners between the ages of 67 and 74 to make or receive personal contributions and salary sacrificed contributions without meeting the work test. As a result, it will enable more senior members to continue building their savings.
Get In Touch
These changes will have a substantial impact on the income of the Australian workforce. As a result, employers must update their payroll systems to incorporate this change.
To help you navigate these changes, feel free to contact us at VeiraMal Consulting for a one-on-one conversation. Our HR consultants will be happy to guide you through this.