Bill seeks to abolish age limits governing superannuation contributions

A private member’s bill put before the House of Representatives seeks to abolish the current age limits governing the payment of superannuation by employers in Australia.

Bill proposal

Under the current provisions of the Superannuation Guarantee (Administration) Act 1992 (Cth) employers are not required to pay superannuation guarantee contributions on behalf of employees once an employee reaches 70 years of age.
The Abolition of Age Limit on Payment of the Superannuation Guarantee Charge Bill 2011 (Bill), introduced in the House of Representatives on 28 February 2011, seeks to abolish the age limit under the Act on the premise that it:

• would be equitable and eliminate age discrimination;
• encourages older workers to remain in the workforce at a time when the ageing of the population is increasingly creating pressures on labour supply and the federal Budget;
• assists the retention of older workers in the workforce, which boosts the economy when compared with a retirement situation; and
• promotes the utilisation of skills that older workers possess.
• Although it has yet to be referred to a House of Representatives or Senate committee for consideration or report, on its face the Bill appears to capture a significantly larger population of workers than the superannuation reform proposals of the current government.

Position of government

As recently as 2 May 2010, the government announced its own plans for reform of the superannuation guarantee age limit, by increasing it from 70 years to 75 years. The government has estimated its reform will benefit around 33,000 employees.

Impact on employers

Whilst the Bill has received support from certain industry groups, including the Financial Planning Association of Australia Limited, there are concerns that it could cause financial pressures for business.

The most significant issue for employers arising from the proposed Bill is the additional cost incurred in employing older workers. By seeking to wholly abolish age limitations, the Bill has the effect of requiring employers to make superannuation guarantee contributions to a larger population of employees than seen under either the current system or the reform package proposed by the government. Accordingly, it has the potential to expose employers to greater levels of cost and liability in terms of superannuation payments.

The Bill’s interaction with the Income Tax Assessment Act 1997 (Cth) may also be problematic for employers, given they are currently unable to claim deductions for contributions after the period of 28 days beyond the end of the month from which an employee turned 75.