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Retirement

Higher superannuation and wages for young and low-income workers kick in today

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  • July 01 2021
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Retirement

Higher superannuation and wages for young and low-income workers kick in today

By
July 01 2021

Low to middle-income earners will see a bump in their pay packets and superannuation as laws previously passed by the government commence today.

Higher superannuation and wages for young and low-income workers kick in today

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By
  • July 01 2021
  • Share

Low to middle-income earners will see a bump in their pay packets and superannuation as laws previously passed by the government commence today.

Young and low-income workers big winners in legislation changes

As part of a host of reforms starting 1 July 2021, Australian workers will see an increase in their overall remuneration packages.

Starting today, the rate of superannuation paid will go from 9.5 per cent of a worker's salary to 10 per cent, while the minimum wage will add an extra 2.5 per cent. 

While the boost to the minimum wage is set to increase the weekly take home pay to $772.60, the higher super rate is expected to benefit 6.7 million workers, with younger and low to middle-income earners said to be the big winners. 

 
 

This super figure is set to grow by 0.5 of a percentage point a year before capping out at 12 per cent in 2025.

Young and low-income workers big winners in legislation changes

According to Industry Super Australia, these changes to superannuation are estimated to add an extra $233 a year to the average worker's super account.

And while the boost might not be life-changing, Industry Super Australia highlighted that small changes add up in retirement. Namely, a 30-year-old on the median wage is now expected to have an extra $19,000 at retirement, a couple will have an extra $38,000.

“Even though the increases are only small now, they’ll add up to make huge positive difference for millions of Australians when they retire,” Industry Super Australia’s chief executive, Bernie Dean, said.

The total benefit from the changes will see Australians get an extra $1.5 billion paid in super in the next 12 months.

Half of the extra super payments – about $784 million will go to those under 40 – and more people in their 20s will get a super boost than any other age bracket.

According to Industry Super Australia, around 63 per cent of those who will benefit from the SG increase are on wages less than $70,000 – many of these 4.3 million workers are in line for a five-figure boost to their retirement savings – which will improve their quality of life at retirement dramatically.

“Young people will be the big winners from these increases and help those that raided their super last year, during the downturn, make up some of the lost ground,” Mr Dean continued.

“This is the first of a number of increases the government has promised and locked in law for the coming few years.”

Minimum wage increase starts today

The Fair Work Ombudsman also issued a reminder to employers that the national minimum wage has increased today to $20.33 per hour (up from $19.84) or $772.60 per week (up from $753.80).

On 16 June 2021, the Fair Work Commission announced a 2.5 per cent increase to the national minimum wage, following its Annual Wage Review. This increase applies from the first full pay period starting on or after 1 July.

Employees covered by awards will also have base rates increased by 2.5 per cent, however, these increases to award wages begin on different dates for different groups of awards.

Extension of the low and middle income tax offset 

In addition to the higher superannuation balance and take home pay, the extension of the low and middle income tax offset also begins today.

As part of the government’s post-COVID-19 recovery package, Treasurer Josh Frydenberg has previously announced a stimulus package through additional tax savings for working Australians.

The temporary offset will benefit more than 10 million low and middle‑income earners. These tax cuts are worth up to $1,080 for individuals or up to $2,160 for couples.

“This is more money to spend in local businesses, giving them the confidence to take on an extra worker, offer an extra shift or buy a new piece of equipment,” Mr Frydenberg concluded.

 

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About the author

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Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

author image

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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