Women will score a sweetener in the upcoming budget. Picture: iStock
Women will score a sweetener in the upcoming budget. Picture: iStock

Thousands score $450 budget win

Treasurer Josh Frydenberg is set to scrap the $450 a month threshold to pay compulsory super in the 2021 federal budget, boosting the retirement incomes of thousands of part-time workers and mums.

News.com.au has confirmed the threshold will be scrapped in Tuesday's budget, a modest change that will ensure more workers are paid super when they earn even small amounts with a single employer.

 

 

It's the threshold that causes almost twice as many women as men to miss out on a super contribution when working in insecure, part-time jobs.

Abolishing the requirement that workers earn $450 a month with a single employer would also not cost employers much - adding only a couple of hundred dollars on average to their costs for each employee.

But over time it's hoped it will help bridge the retirement incomes gap between women and men because women are more likely to miss out under the current rules.

In an interview with news.com.au, Treasurer Josh Frydenberg wouldn't comment on the change but he did confirm women's super nest eggs and economic security will be a major focus in Tuesday's budget.

"We've already got catch up contributions. That does help women who are out of the workforce,'' he said.

"But we are thinking about retirement incomes for this budget and particularly the impact on women.

"In the budget there's a focus on economic security and obviously childcare has been that signature item, and women's safety and women's health as well."

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Treasurer Josh Frydenberg said women were a high priority in the budget. Picture: NCA NewsWire/Gary Ramage
Treasurer Josh Frydenberg said women were a high priority in the budget. Picture: NCA NewsWire/Gary Ramage

Mr Frydenberg said other measures in the budget, including the policy announced over the weekend to help single mothers and parents own their own home with a deposit as low as 2 per cent was also part of the measures designed to improve women's retirement.

"Home ownership for women, for families is of course a priority for us,'' the Treasurer said.

"And what the retirement income review found was that families and individuals that own their own home are going to have a much more secure time."

The Grattan Institute's Household Finances Program Director Brendan Coates said abolishing the $450 threshold was a no-brainer.

"It's redundant in a world of digital payroll systems. Originally it was designed to help small businesses so they didn't face extra paperwork,'' he told news.com.au.

"But there's no reason anymore not to do that. They don't miss out on much. We are talking about $100 to $300 a year."

But the government appears to have junked plans to cover super payments linked to the government's 18-week paid maternity scheme.

Australia's Paid Parental Leave Scheme currently ensures that all eligible working parents - overwhelmingly mothers - receive up to 18 weeks of pay at the rate of the national minimum wage.

However, the PPL scheme currently does not attract the superannuation guarantee and that means it's also not compulsory for any employer to pay superannuation while a new parent is on maternity leave.

Parental Leave Pay is currently $150.78 per day before tax or $753 a week.

It's payable for up to 90 days or 18 weeks which means it's worth around $13,500. From July 1 the super guarantee also rises to 10 per cent.

If the Morrison Government had moved to extend the super guarantee to women under the government's PPL scheme it would have topped up eligible mums super by around $1400 for each child.

Superannuation experts including the Australian Institute of Superannuation Trustees have called for super to be paid on paid parental leave for years, arguing it's the only form of leave that super is not paid on, unlike sick leave and long service leave.

"Women have, on average, four career breaks during their working lives, with the top reasons being maternity leave and childcare,'' a spokesperson said.

"As a result, women's retirement savings stall at various points throughout their working (lives), leaving many women financially insecure in retirement.

"When you take annual leave, sick leave and long service leave, you're paid super. But you don't get super on your paid parental leave whether the government or your employer pays for your leave."

Superannuation Minister Jane Hume has previously described improving women's retirement incomes as an issue she was "passionate" about helping to fix.

"Look, there are a lot of structural features of the superannuation system that disadvantage women,'' she told 2GB radio.

"Super was invented 30 years ago and, to be honest, it just wasn't ‑ it wasn't invented with women in mind. It was built for a man that starts his career at about the age of 19, works without a break until 65 and then retires with a gold watch and his pension. It doesn't account for breaks in the workforce. It doesn't account for caring responsibility. It doesn't account for the gender pay gap. So these are your structural inequities that I think that we can address far better."

Other measures to be unveiled in the Tuesday's budget to boost retirement savings include:

EXTENDING downsizer contributions when you sell the family home to people 60 and over rather than 65. This allows people to make a one off contribution of up to $300k to super from proceeds of sale of a home outside the normal contribution caps. More women than men have used the downsizer contribution so this will also substantially increase their super balance.

REPEALING the work test for individuals aged between 67 and 74. Currently you have to work 40 hours within 30 days to make voluntary contributions (both concessional and non-concessional) but this really limits people who have not had the benefit of compulsory super throughout their working lives from making contributions that would help secure their retirement. This change means people who are between 67 and 74 who may have already retired, are doing volunteer work or who have more flexible work arrangements can continue to make voluntary contributions or salary sacrifice.

EXTENDING the first home super saver scheme from $30,000 per person to $50,000 per person. And allowing eligible single parents to buy a home with as little as 2 per cent under a new government scheme designed to help single income families buy their first home and re-enter the housing market after divorce.

 

 

 

Originally published as Thousands score $450 budget win