The Australian Government has finally delivered on one of its major promises outlined in the most recent federal budget which is the decision to remove the $450 per month Superannuation Guarantee (SG) threshold.
The amendments made to superannuation law were introduced into Parliament on Wednesday 27th October, 2021 will among other things, ensure the removal of a structural discrimination, in place since 1992, which has striped employees with an income of under $450 per month from accessing the superannuation guarantee.
The removal of the $450 Superannuation Guarantee (SG) threshold was part of the government’s budget promise to assist women and was flagged as a move to ensure low-income earners, particularly women and younger Australians, have access to adequate retirement savings.
Commenting on the government’s introduction of legislation that will scrap the Superannuation Guarantee (SG) threshold barrier, the Association of Superannuation Funds of Australia (ASFA) said if Parliament approval is granted some 300,000 people stand to benefit, of whom approximately 63 percent are female.
“Removal of the $450 threshold improves the coverage of superannuation and enhances equity across the super system. Women’s lower super balances in particular, have given rise to critical social policy issues, including increasing levels of poverty and homelessness in retirement. We will continue to work with the government to achieve broader structural reforms to improve retirement outcomes for low-income earners,” said ASFA chief executive Dr Martin Fahy.
Other changes which were included in the Treasury Laws Amendment (Enhancing superannuation outcomes for Australians and helping Australian businesses invest) Bill 2021 consist of an increase in the maximum amount of voluntary contributions that people are able to release under the First Home Super Saver Scheme (FHSSS) from $30,000 to $50,000.
Furthermore, if the omnibus bill garners the essential support, it will reduce the eligibility age to make downsizer contributions into super from 65 to 60 years of age, allowing more older Aussies to consider downsizing to a home that better suits their needs.
On top of this, the bill supports the repeal of the work test for non-concessional and salary sacrificed contributions that will be implemented through regulation changes the government plans to make before the end of 2021.
It also reduces costs and simplifies reporting for self-managed superannuation funds and small APRA-regulated funds and extends the end date of temporary full expensing to 30th June 2023.
Superannuation Changes Came into Effect on Monday 1st November 201
As a result of holding multiple accounts, approximately 4.4 million Australian workers are paying more than one set of superannuation fees.
New rules introduced on Monday 1st November 2021 now means that employees who are changing jobs will have their superannuation fund follow them. The Treasury believes that this new rule will boost the superannuation balances of Australian employees by a combined total of $2.8 billion over the next 10 years.
The new rules mean that when changing jobs, a new employee will continue receiving contributions into the same ‘stapled’ fund, rather than being automatically signed up for their new employers’ default superannuation option unless they opt to remain with their current fund.
The Treasury has said that the changes mean that the average worker who has a $58,000 starting salary would have $399,000 in 40 years if they held multiple accounts. If they had a single ‘good’ superannuation account, they would have $497,000.
The new rule was introduced in conjunction with the Australian Government’s Your Future Your Super reforms from 2020.
However, according to figures from the Australian Prudential Regulation Authority (APRA) close to 1 million Australians may have inadvertently stapled to a ‘dud’ fund.
In September 2021, the financial watchdog discovered that 13 funds had failed to meet its performance and fees benchmark. Those funds service around 1.1 million Australians, and manage $56.2 billion in funds.
In response to the performance benchmarks in September 2021, the Australian Institute Of Superannuation Trustees (AIST) has encouraged Australian employees to consider their options carefully, as a result of the new stapling provisions.
“While MySuper members will have access to information about their fund’s performance, there are thousands of super products that haven’t been tested or included in the comparison tool. This leaves a large group of Australians potentially stapled to a dud fund when they change jobs after 1st November 2021. Unfortunately, it’s likely that this will happen to many, many Australians and will have a detrimental impact on their retirement savings,” says AIST general manager of advocacy Melissa Birks.