Accountant warns removal of $450 super threshold could increase compliance for small businesses

The scrapping of the $450 monthly superannuation threshold makes Single Touch Payroll (STP) “a must for all” small businesses, unless they want to face an “admin nightmare”, according to one accountant. 

Legislation to remove the minimum income threshold for superannuation guarantee payments passed Parliament on Thursday, which means employees that earn below $450 a month from an employer will soon be entitled to superannuation. 

Australian employers are not currently required to pay super to workers that earn below that limit each month. 

The federal government announced its plans to remove the minimum monthly income threshold in the 2021 budget, as part of an effort to improve equality in the superannuation system, as the majority of workers who earn less than $450 a month are women. 

On Thursday evening, Superannuation Minister Jane Hume said on Twitter that removing the “discriminatory, inequitable relic” will make “a real difference” to thousands of workers. 

Hume said the change means 300,000 Australian workers will receive super contributions from their employers for the first time and around 200,000 of those will be women, which reflect estimates in the government’s Retirement Income Review. 

The change will come into effect from July and accountant Lisa Greig, founder of tax and business advice service Perigee Advisers, is urging employers with staff currently earning below $450 each month to start preparing now. 

While using the STP system is now mandatory for all Australian employers, Greig says there are still small businesses not using the system. For those businesses, the removal of the threshold could increase the complexity of paying workers who only do short shifts, and potentially lead to a financial cost if a mistake is made. 

Greig gives the example of a small business that wants to trial a new employee, and agrees to pay them $25 an hour for a four-hour shift. The employer would pay the worker $100 and after July, would need to also pay $10 in superannuation. If that $10 wasn’t paid in time and to the correct superannuation fund, “it could end up costing you $50 by the time you get it sorted”, says Greig. 

“It increases the administration burden on small businesses that are trying to do the right thing,” she tells SmartCompany.

Greig is concerned some businesses may choose instead to pay workers cash for short shifts; ask the worker to invoice them as a contractor instead; or alternatively not pay them at all, for risk of getting the compliance wrong. 

Greig says it will also be essential for the recently introduced super fund stapling system — which ‘staples’ workers to the first super fund they join when they start a new job unless they explicitly choose to join another — works as intended, as some businesses will be relying on new workers to provide the correct details of their super fund in order for the money to go to the right place. 

“If they get it wrong … and it bounces back, the business will need to prepare a charge statement, and do this and do that. It could end up costing a couple of hundred dollars,” she says. 

The end result, says Greig, could be that some small businesses question whether to employ someone at all. 

The superannuation guarantee is currently set at 10%, having increased from 9.5% in July 2021. It is due to increase to 12% by 2025-26. 

The Australian Taxation Office provides a calculator on its website for employers wanting to understand their superannuation guarantee obligations.