The Federal Government has introduced legislation to Parliament for superannuation payments to be paid on pay day.
The SDA has been advocating for Pay Day Super for several years, and has been calling on the Federal Government to urgently legislate this since its re-election.
This is great news for millions of Australian workers and if passed, will lead to increased super balances for many workers.
How often is superannuation currently paid?
Right now, most employers only pay superannuation every three months, not every pay day.
By law, there is no requirement for employers to pay it more frequently.
How would Pay Day Super benefit me?
Paying super on pay day instead of each quarter means workers would earn more interest on their super sooner, boosting their retirement savings.
When super is only paid quarterly, the benefits of compound interest are lost for the individual employee – that money is sitting with the employer for 3 months when it could have been earning interest for the employee.
According to research by the Super Members Council of Australia, paying superannuation on pay day could boost retirement savings by an average of $7,700.
Unpaid superannuation and super theft is also costing many workers.
A new report by the Super Members Council of Australia found that young and low-income women are the most vulnerable to missing out on superannuation.
Paying superannuation on payday would make it much easier for workers to track their super balance and identify if it hasn’t been paid correctly.
Super is a part of your pay. It only makes sense that it’s paid into your super fund at the same time as your pay.
Federal Government signals changes to the LISTO (Low Income Super Tax Offset) Threshold
Millions of workers are set to benefit from changes announced by the Federal Government to improve the Low Income Super Tax Offset (LISTO) Threshold, making superannuation fairer for low paid workers.
What is LISTO?
The Low Income Super Tax Offset helps low-paid workers get the same super tax benefits as everyone else.
It also exists to ensure that workers don’t pay more tax on their super contributions, than they do on their income.
Currently, if a worker earns $37,000 or less each year and also earns superannuation, they are eligible for a tax refund of up to $500 into their super account.
The problem is that this income threshold and refund have not increased in eight years – even though tax brackets have changed and super contributions have increased.
The $500 payment cap is based on a 9% super guarantee rate, not the current 12% rate.
It means millions of workers have been missing out on tax benefits, that this offset was originally designed to deliver.
What are the proposed changes?
From 2027, the Federal Government has proposed:
- Increasing the income threshold from $37,000 to $45,000
- Increasing the LISTO refund from $500 to $810
These changes would help boost superannuation savings for 1.2 million low-paid workers, especially women and young workers. It means workers will pay less tax on super than on income from 2027.
It could see some workers retire with up to $60,000 more than under the current levels.
These are great steps towards making our superannuation system fairer for all workers.