No more income thresholds: most workers now eligible for the superannuation guarantee

Employers are now required to pay a superannuation guarantee to most of their workers. We set out the important changes to superannuation guarantee obligations made effective from 1 July 2022, and outline the ATO’s position on specific worker circumstances such as contractors and international workers.

What was the law before 1 July 2022?

Prior to the recent changes, employers only needed to pay a superannuation guarantee (SG) to workers who were paid $450 or more (before tax) in a calendar month.

The relevant super laws previously provided that where an employee was paid salary and wages of less than $450 in a given month, those salary or wages were disregarded for the purposes of calculating the employee’s superannuation guarantee contribution. Where monthly earnings fluctuated, SG contributions were only payable for the months in which the worker earned more than the monetary threshold.

The minimum SG payable to eligible workers was 10% of the worker’s ordinary time earnings (OTE) – having risen earlier from 9.5% on 1 July 2021.  A worker’s OTE is the amount that employers pay their workers for their ordinary hours of work, and includes salary and wages, shift loadings, commissions, bonuses, and some allowances.

What changed on 1 July 2022?

Parliament amended the SG Act by removing the monthly minimum threshold for salary or wages to count towards the SG.

Now, an employer’s obligation to pay SG contributions to their workers arises on all OTE paid to eligible workers, irrespective of the amount the worker had been paid. This change is intended to increase access to superannuation for approximately 300,000 people, or 3 per cent of workers, who were previously not entitled to a SG by reason of the $450 threshold.

Parliament has noted this change will affect workers who are mainly young, lower-income, part-time workers – around 63 per cent of which are female.^[1]

Further, the minimum SG payable to eligible workers has increased to 10.5% of the worker’s OTE, and is scheduled to progressively increase to 12% by 2025.

Who is an ‘eligible’ worker?

Generally, all workers are now eligible to receive a SG from their employer. However, there are additional eligibility rules for certain types of workers. These additional eligibility rules must be considered by employers when engaging workers in the following contexts:

1. Contractors
   
   Employers must pay SG contributions to contractors if they are paid mainly for their labour. This is the case even if the contractor provides an Australian business number, and includes payments to a contractor:
   
   
   • under a verbal or written contract that is mainly for their labour (more than half the dollar value of the contract is for their labour);
   • for their personal labour and skills (payment is not dependent on achieving a specified result); or
   • to perform the contract work (work cannot be delegated to someone else).
   
   OTE is the labour component of the contract, and does not include:
   
   
   • any contract payments that are for material and equipment;
   • overtime for which the worker was paid overtime rates; or
   • GST.
   
   Generally, contractors are also entitled to choose their own super fund. Employers must offer eligible contractors a choice of super fund within 28 days of their start date. If a contractor is eligible to choose a super fund but does not, then to avoid penalties, the employer must request the contractor’s stapled super fund details from the ATO.
    
2. Employees under 18
   
   Prior to 1 July 2022, employers were required to pay SG contributions to employees under 18 years if they worked more than 30 hours in a week and were paid $450 or more (before tax) per month.
   
   From 1 July 2022, employers must pay SG contributions on payments made to an employee under 18 years if they work more than 30 hours in a week, regardless of how much they are paid.
    
3. Domestic or private workers
   
   Prior to 1 July 2022, employers were required to pay SG contributions to domestic workers if they worked more than 30 hours in a week and were paid $450 or more (before tax) per month.
   
   From 1 July 2022, employers must pay SG contributions on payments made to domestic or private workers if they work for more than 30 hours in a week, regardless of how much they are paid.
   
   These include workers who do work:
   
   
   • relating personally to an individual (not to a business); or
   • relating to a person’s home, household affairs or family – such as a nanny, housekeeper or carer.
      
4. International workers
   
   Employers must pay SG contributions on payments made to international workers – even if they are a temporary resident, such as a backpacker or a working holiday maker.
   
   For Australians temporarily working in another country, employers must continue to pay super contributions for them in Australia. Employers can apply for a certificate of coverage so they do not have to pay an equivalent SG in the other country as well.
   
   Employers do not have to pay a SG for:
   
   
   • non-resident employees who work outside Australia;
   • some foreign executives who hold certain visas or entry permits; and
   • employees temporarily working in Australia who are covered by a bilateral super agreement – you must keep a copy of the employee’s certificate of coverage to prove this exemption.

^{[1] Explanatory memorandum, Treasury Laws Amendment (Enhancing Superannuation Outcomes For Australians and Helping Australian Businesses Invest) Bill 2021 (Cth)}

More Cleardocs information on related topics

You can read earlier ClearLaw articles on a range of topics, such as:

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• A Casual Is A Casual: High Court Upholds Workpac's Appeal In Workpac v Rossato Consistent With Legislative Changes
• Employee Or Contractor In The Age Of The Gig Economy - The Olias Case

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