Retirement is a long way off for young workers but that’s no reason to neglect super
Many casual entry-level jobs are now undertaken by youngsters still studying at school or university. The benefits are obvious: it fosters a strong work ethic and gives them their first lessons in financial literacy.
While super might be the last thing on their minds, learning the ropes early is something they are likely to be grateful for when they are older. Thanks to the power of compounding, investing at an early age beats any desperate attempts to make up for lost time later in life.
Dean Bornor, head of member advice and education at REST, a large industry fund with many young retail workers, says it puts a lot of effort into encouraging young workers to take their super seriously. “Because they have small balances they might think it’s not important but over the course of the next 35 years it’s going to become tremendously valuable – it’s what we try and educate our younger members on.”
The first step is to determine whether you are entitled to the superannuation guarantee (SG). Certain rules apply, and it doesn’t matter whether you work casual, part-time or full-time hours.
Those 18 and older must earn at least $450 a month before tax to be eligible for super’s 9.5% of wages. Those under 18 are required to work at least 30 hours each week and be paid at least $450 in a full calendar month.
“There are certain rules the tax office stipulates, as far as when an employer needs to pay you the SG,” says Bornor. “If you are paying an employee over 18 $450 or more in a calendar month, then the SG is payable. If an employee earns less than that in a month, there’s no obligation on the employer’s part to pay the SG. If you are under 18, then there is a 30-hour a week rule. If you are working less than 30 hours a week, there is no requirement to pay the SG.
If you are entitled to the SG, the next step is to find out where your contributions are going. If you haven’t chosen a super fund (and filled in a form) your employer will do it for you, with the money paid into a default investment option called MySuper.
“Most employees go with the default fund but often don’t know which fund it is so they need to check that with their employer,” says Bornor. “They should also receive something from their super fund acknowledging their membership. It’s important for them to register online because that means they can keep track of their contributions.”
By law employers are required, as a minimum, to make quarterly SG contributions but this can make tracking payments difficult. Industry Super Australia (ISA), the umbrella body for industry funds, estimates 2.98 million workers were short-changed by almost $2000 each in 2015-16. Most of those underpaid were casual and part-time workers.
There is legislation before parliament to better enforce SG payments. However, ISA says the reform doesn’t go far enough and it would like to see the frequency of SG payments shifted from quarterly to monthly or fortnightly to better align with wages.
So what should you do if you think you’ve been ripped off? Raise it with your employer. If that gets you nowhere and you are a member of an industry fund, ask for help. Many have an arrears process that pursues unpaid super.
Check with your fund if they have an app that can alert you to when contributions have gone in. Australian Super and Rest are just two funds that offer this. “Where we have been unable to resolve a case of non-payment, we will request our credit manager to engage with the employer,” says Bornor. Often it’s an admin issue. Missed payments are quickly recovered.
The tax office can also help.
Vita Palestrant was editor of the Money section of The Sydney Morning Herald and The Age. She has worked on major newspapers overseas.