Minister told 400,000 employees missing out on super due to $450 rule

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The Coalition didn’t adopt the recommendation of two Senate inquiries to abolish the $450 monthly threshold for employees to receive Super Guarantee contributions, despite being briefed that it was affecting 400,000 employees and that it would have minimal impact on wages or employment.

Currently employers don’t have to pay Super Guarantee for employees who earn less than $450 a month. The threshold applies on a per-employer basis, meaning people working multiple jobs each paying less than $450 a month would still not receive employer super contributions. Many groups have long called for this rule to be abolished.

Documents published by Treasury in relation to a Freedom of Information (FOI) request now show that while the Government had yet to respond to two Senate inquiries which had recommended abolishing the $450 threshold, the Minister responsible was told that the rule meant 400,000 employees weren’t receiving Super Guarantee contributions.

An undated document titled “Talking Points: Superannuation Guarantee ‘$450 rule’”, says the $450 threshold is a “long-standing feature” of the super system, and is “designed to balance administrative effort of paying small amounts of superannuation against adequate retirement savings”.

The talking points say that removing the $450 threshold would increase the number of workers covered by the Super Guarantee, “but it may also result in the creation of small balances that are largely eroded by fees and charges”.

Additionally, “abolishing the threshold is likely to increase the cost for employers of taking on some workers, particularly in low-wage or casualised workforces, or result in lower take home pay for these works to mitigate the additional superannuation costs”.

The FOI documents also reveal that then-Minister for Revenue and Financial Services Kelly O’Dwyer requested an analysis of removing the $450 threshold in 2017, after the Nick Xenophon Team introduced a Bill to do so.

While acknowledging issues with the data, it is estimated that in 2014/15 there were around 400,000 employees not receiving Super Guarantee due to the threshold, an estimated 60% of whom were female.

“The cost of removing the $450 rule would be borne primarily by employers, not employees,” says the document, as many of the employees would be earning minimum wage or on an award.

“Removing the $450 rule would likely increase the national wage bill by less than 0.1 per cent. We consider the change would be unlikely to have a material impact on either economy-wide employment or total hours worked.”

Though the Minister was also told that the $450 threshold “may help prevent erosion of low balance accounts through taxes and fees”. The Low Income Super Tax Offset (LISTO) “effectively removes the contributions tax for many affected employees”, but “fees and premiums are likely to be very high as a proportion of contributions”.

Kelly O’Dwyer was in the same role when the Government refused to adopt a Senate Inquiry recommendation to abolish the $450 threshold.

A Senate Committee inquiry into the economic security for women in retirement – which produced the report “a husband is not a retirement plan” in April 2016 – had recommended removing the $450 threshold. The Government’s response – which came more than two years after the report was published – didn’t adopt this recommendation.

Recent timeline on $450 Super Guarantee threshold

  • April 2016 – Senate inquiry into economic security for women in retirement recommends removing $450 threshold
  • May 2017 – Senate inquiry into non-compliance with Super Guarantee recommends removing $450 threshold
  • October 2017 – Minister O’Dwyer receives Treasury Ministerial Submission on $450 threshold
  • August 2018 – Government responds to Senate inquiry into economic security for women in retirement

Abolishing the $450 SG threshold was also a recommendation of a later Senate inquiry into the non-payment of Superannuation Guarantee, which reported in May 2017. Senator Jane Hume, who is now the Assistant Minister for Superannuation, Financial Services and Financial Technology, was Deputy Chair of the Committee that conducted the inquiry. As Deputy Chair, Senator Hume issued a ‘Dissenting Report’ which said the recommendation to abolish the threshold was beyond the scope of the terms of reference for the inquiry, but also that it was an important recommendation that the Government “should examine it in the near future”. During the hearings Senator Hume called the $450 threshold “ridiculous” and a “dinosaur” from 1992 – when it was introduced.

Heading into the 2019 Federal Election, Labor had a policy of phasing out the $450 threshold.

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