Young Aussie workers miss out on $10k at retirement because of old law

An old law is costing Australian workers about $10,000 in superannuation by the time they retire, according to a peak body.

A new report has found young Australian workers are missing out on $10,000 at retirement due to an old law that was designed to prevent them from losing money.

Employees aged under 18 who work less than 30 hours a week are excluded from superannuation payments, with fresh research showing more than half a million teenagers are denied $368m in super contributions each year.

The Super Members Council report said the law was introduced in the 1990s when super was paid at a rate of 3 per cent, and it was feared smaller balances of teens would be eaten away by fees and charges.

Now the super rate is at 11.5 per cent on top of wages, with fee caps on low balances and limits on insurance for teens.

A new report has found Australians aged under 18 working less than 30 hours a week miss out on $10,000 in super by the time they retire. Picture: NewsWire / Ian Currie

The council found a teenager who worked for at least two years would benefit from $2200 in their super by the time they were 18 years old, amounting to $10,000 when they retired.

The council is calling on the federal government to amend the law which would mean about 505,000 workers aged under-18 were paid on average $730 each in super contributions.

Super Members Council chief executive officer Misha Schubert said paying under-18s super would set their retirement saving on the right footing and give their super the maximum amount of time to grow.

“Every Australian worker, at every age, deserves the right to set themselves on the path to a dignified retirement,” she said

“Australians strongly support universal super – and know it’s a workplace right.

“Super should be for everyone, paid from the first hour of your first job, and fixing this outdated exclusion is overdue.”

The Super Members Council is calling on the government to amend a law that excludes young Australian workers from being paid super contributions. Picture: NewsWire / Ian Currie

The council believed removing the current 30-hour a week threshold would simplify administration for employers, who faced the challenge of tracking hours for under-18 workers and reducing risks of underpayment.

The council acknowledged it would impact some businesses and recommended a transition period, similar to what was done in 2022 when the government ended an exclusion for workers earning less than $450 a month.

“This is a modest investment for our children’s future – adding just 0.03 per cent to total employee costs,” she said.

But Small Business Australia executive director Bill Lang said a majority of small business owners would see it as another disincentive to hiring young people.

Small business advocates said additional super contributions would disincentivise owners from employing young people. Picture: NewsWire / Nicholas Eagar

Mr Lang said almost one in two small businesses were unprofitable due to falling demand for what they sell and every one of their business expenses increasing, often at rates higher than the consumer inflation rate.

“Young people learn critical workplace skills – anything that makes it more expensive to hire them means that some will miss out on the significant skill building experiences they currently benefit from,” he said.

An Australian Chamber of Commerce and Industry Australia spokesperson said it would be extra burden of red tape on small businesses at a time when the sector was already under stress from excessive regulation.

“With a very high turnover of school aged casual workers, this would add to already high transactional costs for small business employers taking on young workers,” the spokesperson said.

“Increasing the cost and administrative burden of taking on young workers makes it less attractive for employers to engage with and train young workers.”

The Council of Small Business Organisations Australia chief executive officer Luke Achterstraat shared their sentiments stating many business owners had to pay above award rates to attract workers due to staff shortages, something employers might not be able to do if the super scheme is extended.

“Adding super for this cohort will either make that person 11 per cent more expensive to employ or it would be taken out of their salary meaning they’d get less take home pay,” he said.

“Obviously a lot of high school age students seek casual work for some pocket money and the real driver for them is to have cash for discretionary spending.”

Small Business Australia executive director said a majority of small business owners would see it as another disincentive to hiring young people. Picture: NewsWire / David Geraghty

One of Australia’s largest superannuation funds Rest supported calls for all Australian workers to earn super regardless of how many hours they worked.

Rest chief executive officer Vicki Doyle said the new modelling made it clear that superannuation should be universal for all under-18 workers.

“This law is simply unfair and needs to change,” she said.

“Every worker under the age of 18 deserves to earn super no matter how many hours they work.”

She said it was essential for all young workers to have a fair start with super and receive the benefit of compounding returns from day one of their working life.

“Simplifying who is eligible for super will also help make the overall experience of super easier for our members,” said.

“A consistent approach to paying super on every dollar will help drive better engagement from a young age, which in turn supports better future outcomes.”

Originally published as Young Aussie workers miss out on $10k at retirement because of old law