20 June 2022
From 1 July 2022 eligible people will be able to earn super regardless of how much they are paid. Until recently, there was a requirement to earn $450 a month before earning super. The removal of the $450 threshold is good news if you’re working several jobs or work part-time. The change will help thousands more people build a nest egg for their retirement.
The removal of the $450 threshold is good news. Also from 1 July 2022, the superannuation guarantee rate will increase to 10.5%. So if you earn $450 a month you can expect to receive $47.25 from your employer into your super savings.
Helping low-income, casual and part-time workers
This change will help low-income, casual or part-time workers. Until now, the $450 minimum earnings threshold meant up to 300,000 Australians1 missed out on super – the vast majority of whom are women. This puts these people at a disadvantage when it comes to saving for retirement.
AustralianSuper advocated for this change for many years and we welcome the new law. If you’re a casual or part-time worker, you’ll now get paid the super you deserve. This will help you build your retirement savings.
AustralianSuper Chief Executive Paul Schroder says the new law is a positive step.
‘The abolition of the $450 monthly threshold means more workers, particularly women, will be able to benefit from the super system. For too long this group of people has been discriminated against when it comes to eligibility for super payments.’
Case study: Belinda’s super savings
This is Belinda
Belinda2 is 25 and starts her first job on 1 July 2022.
Belinda opens an AustralianSuper account, choosing the default Balanced option and opts out of insurance. Her opening account balance is $0.
In her role as a part-time receptionist she earns $400 a month, plus super in line with the superannuation guarantee rate. She stays in the same job on the same salary and super (in today’s dollars) for her working life and retires 42 years later aged 67 years.
Before the $450 threshold was removed, Belinda wouldn’t have earned super during her working years. However, the change in law means she’s $38,000 better off in retirement*.*Assumptions include: Belinda doesn’t take any career breaks or make any voluntary contributions. She is eligible for the low-income super tax offset. Assumed earnings of 6.5% net returns p.a. and super contributions are 10.5% on 1 July 2022, rising to 12% as legislated by 2025, and are assumed to remain at 12% until the member retires. She opts-out of insurance Results are expressed in today’s dollars by discounting at wage inflation of 3.5%, CPI of 2.50% and fees of $117 p.a plus 0.04% of the account balance, subject to the 3% fee cap.
A step towards greater financial security for everyone
The removal of the $450 threshold ends a long debate at a government level, and is much-needed change. In 2019 the federal government ordered an independent panel look at Australia’s retirement income system. The Retirement Income Review found that removing the threshold would lead to better retirement outcomes for women, low-income earners, and particularly part-time and casual workers.
Around 300,000 Australians, including about 200,000 women and 100,000 men, were missing out on super each year because of this rule. The review found that women were losing about $4.7 million in super contributions every month as a result3.
An extra $120 million to those who deserve it
Industry Super Australia estimates an extra $120 million a year will flow into Australia’s super system because of the change4.
As Australia’s largest super fund, we’ll continue to advocate for a superannuation system that’s fair for all Australians, so you have the best chance to achieve the retirement you want.
1. Pre-Budget Submission for 2018-19, Association of Superannuation Funds of Australia, February 2018.
2. ‘Belinda’ is not a real person. The example is provided for illustration purposes only and isn’t a representation of the actual benefits that may be received or the fees and costs that may be incurred.
3. Retirement Income Review
4. Industry Super Australia, Response to Federal Budget May 2021
This may include general financial advice which doesn’t take into account your personal objectives, financial situation or needs. Before making a decision consider if the information is right for you and read the relevant Product Disclosure Statement, available at australiansuper.com/pds or by calling 1300 300 273. A Target Market Determination (TMD) is a document that outlines the target market a product has been designed for. Find the TMDs at australiansuper.com/TMD.
AustralianSuper Pty Ltd ABN 94 006 457 987, AFSL 233788, Trustee of AustralianSuper ABN 65 714 394 898.