Changes to superannuation rules from 1 July will help close the retirement gap for low-income earners. But are Canberra businesses ready to foot the bill?
The Federal Government will scrap the minimum monthly earnings threshold for superannuation contributions from 1 July, 2022. After this date, employers will be required to pay super on the wages of all employees over the age of 18, including those who earn less than $450 per month.
The change means employers should act now to work out how their payroll and accounting systems will need to be updated to calculate the correct super for low-income earners from the start of the financial year.
DFK Everalls Business Advisers and Accountants director Melissa Healy said businesses should review each employee’s “card” or “pay template” in their payroll software in preparation for the change.
She said this would ensure super was calculated on all relevant wages paid and the “less than $450” threshold was turned off on their payroll system from 1 July.
Business owners are also being advised to review their budgets for next financial year to ensure they fully understand what impact the change will have on their labour costs.
Depending on the type of business, and how many employees they usually have earning less than $450 per month, the extra cost could be significant.
“Consequences could include the need to review their employee strategy, for example changing rosters or types of employment structures and reviewing overheads to see if compensating cost savings can be made elsewhere,” Ms Healy said.
“Some businesses may need to review their pricing model to cover the additional costs.”
From 1 July, 2022, the amount of superannuation payable for all staff will also increase from 10 per cent to 10.5 per cent.
Canberra Business Chamber CEO Graham Catt said small businesses would be looking for new initiatives from the Federal Government that offset the increased super costs and provided support to help them grow and create more jobs.
“These changes to superannuation arrangements will add additional costs for small businesses, both directly to the payroll and in increased administration time,” he said.
“For employers, the benefits to their employees on low incomes of building their savings through superannuation will be a positive change.
“It is important to remember though, that many small businesses who employ casual staff have been through a lot over the past two years.
“The cost of staffing has been and will keep increasing, along with other costs such as fuel, supplies and rent.”
Currently, employers don’t have to pay the compulsory Super Guarantee for particular employees if their gross pay during a calendar month is less than $450 before tax (subject to other eligibility requirements). This includes casual and part-time employees and people working with multiple employers to make a living.
The Federal Government expects the change to result in more than 300,000 Australian workers receiving super contributions from 1 July, of which two-thirds are anticipated to be women.
Ms Healy said the new rules would make the Australian superannuation system much more equitable and were a step towards closing the gendered retirement gap.
“This is an important step towards improving the retirement savings for low-income earners, particularly women and younger Australians who work part-time, whose superannuation has been adversely affected by this threshold,” she said.
Employers will need to be particularly careful to get superannuation fund details from all new employees to ensure their super is paid on time and to avoid nasty late payment penalties.
“It is important for employers to remember the new Super Stapling system that was implemented to reduce the creation of duplicate accounts when workers start new jobs,” Ms Healy said.
“The changes ‘staple’ workers to the first super fund they join unless they explicitly choose to join another.”
Employees currently earning less than $450 per month from one or more employers should also ensure they have a superannuation fund set up.
Ms Healy advised shopping around for a fund offering lower fees for low-income earners.