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Removal of the $450 monthly SG threshold

29/11/2021

In brief

  • Applies from 1 July 2022
  • Employers will have to pay SG contributions on monthly salary/wages even if they are less than $450 for a calendar month (Currently this is not the case)
  • Will benefit part time and casual employees who earn less than $450 in a calendar month
  • Will benefit part time and casual employees who have two or more unrelated employers each paying salary/wages of  less than $450 per calendar month
  • Will disadvantage employers who have not been voluntarily paying SG contributions on monthly salary/wages of less than $450 per calendar month
  • The rule that salary or wages of under 18 year olds are not counted for SG purposes is unchanged

Now the details

In broad terms, the Superannuation Guarantee Scheme (SG Scheme) provides that an employer who does not provide a minimum level of superannuation support (currently 10% of an employee’s ordinary time earnings for 2021/22 increasing to 10.5% for 2022/23) will be liable to pay to the Government a charge (the Superannuation Guarantee Charge or SG Charge).

As this charge is not tax deductible to the employer, it is in the employer’s interest to provide the minimum level of superannuation support for an employee as it will be cheaper than incurring the SG Charge.

Example

The current position is illustrated in the following example.

Bill is aged 20 and has worked during January, February and March earning total wages of $1,200.  However, the level of SG contributions his employer is required to make (assuming 10% rate for 2021/22) will depend on how those wages were spread over the three months. 

If Bill earned $400 per month then – there will be no SG support as each monthly wage is under the $450 threshold.

If Bill earned $600 during January, $500 during February and $100 during March – then Bill’s SG support will be based upon the quarterly total of $1,100 (March’s wages being under the $450 threshold are not counted).  So, in simple terms, Bill’s employer will have to pay $110 SG contributions.

From July 2022 Bill’s employer will have to pay $126 of SG contributions in respect of the quarter (10.5% rate will apply from 1 July 2022).  It will be irrelevant whether the wages for any calendar month were less than $450.  So in the situation where Bill was paid $400 per month – the employer will have to pay $126 SG contribution for the quarter.  In the situation where Bill was paid $600, $500 and $100 over the quarter, Bill’s employer would pay $126 of SG contributions (not $110).

Now the nerdy stuff

The change will be effected by removing s27(2) of the Superannuation Guarantee (Administration) Act 1992.  The change is achieved by Schedule 1 to the Amendment Act.