Yahoo Finance 'Unfair' super rule costing Aussie workers $10,000
Young Aussies are missing out on $885 per year in superannuation.
Thousands of Aussie workers are being left worse off at retirement, thanks to an ‘unfair’ and ‘out-of-date’ superannuation rule.
Under the current superannuation laws, workers aged under 18 are not entitled to compulsory super contributions unless they work more than 30 hours a week for the same employer.
New modelling by Industry Super Australia found about 375,000 young workers were being locked out of the superannuation system because of this law, costing them $330 million a year.
Also read: Super boost: Millions of Aussies to get extra $330 from tomorrow
Also read: Slash your tax bill with this super move
The average under-18 worker is missing out on an extra $885 per year in super contributions. Because of compound interest, these contributions would have grown to $10,200 by retirement age.
Industry Super Australia is calling for the 30-hour-per-week threshold to be removed, and said it discriminated against young people at the start of their working life.
“This is an out-of-date law that discriminates against our youngest workers just as they’re starting out. It’s unfair and the law needs to be modernised,” Industry Super Australia chief executive Bernie Dean said.
“Locking thousands of teen workers out of our world-class retirement-savings system is not giving them the super start to work they deserve. How can we explain that young workers don’t get super while an older colleague doing the same job does?”
Removing the threshold would also ease the administrative burden on employers who were currently required to monitor which employees exceeded the threshold each week, Industry Super Australia said. This can be particularly difficult given the casual nature of the workforce and when super is paid quarterly.
Most under-18s missing out
The vast majority (92 per cent) of under-18s usually work fewer than 30 hours per week in their main job. Despite this, paid work is ongoing for many underage workers, with 75 per cent employed for six to 12 months a year.
When super was first introduced in 1992, the decision to exclude under-18s from super contributions was due to concerns that small super balances would be eroded by fees and insurance.
But, since April 2020, super funds have not been able to offer insurance automatically to new members if they are under 25 and their account balance is less than $6,000. There are also caps on fees.
Follow Yahoo Finance on Facebook, LinkedIn, Instagram and Twitter, and subscribe to our free daily newsletter.
