SMC calls for reforms to scrap age-based exclusion
More than half a million employees under the age of 18 are missing out on $411 million in super this financial year due to "outdated age-based exclusion," according to the Super Members Council (SMC).
The SMC, in a new analysis released this month, revealed that around 530,000 employees under 18 years old will miss out on an average of $780 a year in super contributions.
This is equivalent to a total of $411 million every year, a seven per cent increase from two years ago.
Misha Schubert, SMC's chief executive officer, blamed the gap on an "outdated" rule that states employees under 18 are only guaranteed super if they work more than 30 hours a week for a single employer.
"Australia's super system is meant to be universal. This outdated age-based exclusion is denying hundreds of thousands of teenage workers the opportunity to start building their retirement savings," Schubert said.
According to the SMC, most employees under 18 are impacted by the restrictions, as 91% of them are working less than 30 hours a week, making them miss out on potentially around $2,500 in super contributions by age 18.
"The earliest contributions into your super make the biggest difference to how much super you'll end up with because they have the longest time to grow. A few thousand dollars missed during a teenager's first years of work can become more than ten thousand dollars lost by retirement," Schubert said.
Women under 18 are even more vulnerable to the restrictions, the SMC added, as it pointed out that they are more likely to work part-time than teenage men.
The analysis from SMC showed that a young woman could miss out on around $2,500 in super contributions before turning 18, about six per cent more than a male teenager's potential losses.
"The gender super gap doesn't suddenly appear later in life. For many women, it starts from their very first job," Schubert added.
'Outdated' rule needs to be scrapped
The SMC said the outdated age-based exclusion needs to be scrapped, as it called on reforms that would make super paid from the first hour of an employee's job.
"More than half a million young Australians are missing out on a workplace right to super that 17 million Australians have – and that's just not fair," Schubert said.
"Scrapping this outdated exclusion would ensure the next generation of young women get a fairer start to their retirement savings."
The SMC said 85% of Australians already support this move, adding that the council would also support a transition period for businesses if changes are introduced.
Meanwhile, it pointed out that axing the age-based exclusion could benefit businesses.
Scrapping the under-18 exclusion would simplify super obligations for employers by giving workers of all ages the same super entitlement, according to the SMC.
Business owners can also generally claim a tax deduction for super contributions, meaning the estimated impact on businesses would be around 0.03% of total employee compensation.
