A number of employment related financial thresholds are indexed annually each 1 July. Below is a summary of some important changes effective 1 July 2018.
High income threshold: Why is the high income threshold important?
The high income threshold affects how modern awards apply to employees. Further and importantly, employees who earn more than the high income threshold and who are not covered by a modern award or enterprise agreement are not able to access the unfair dismissal jurisdiction. An unfair dismissal claim is the most common form of challenge to a termination of employment.
What is included in the high income threshold?
When determining whether an employee’s earnings exceed the high income threshold, an employee’s earnings include:
- Wages;
- Money that is paid on their behalf (e.g. superannuation top ups or salary sacrifice); and
- The agreed value of non-monetary benefits (e.g. laptop or mobile phone).
When determining whether an employee’s earnings exceed the high income threshold, an employee’s earnings do not include:
- Payments the amount of which cannot be determined in advance (e.g. commissions, bonuses or overtime unless guaranteed);
- Reimbursements; and
- Superannuation contributions that the employer is required to make.
High income threshold and unfair dismissal compensation limit
| 2017/2018 financial year | 2018/2019 financial year |
| $142,000 | $145,400 |
The compensation limit for unfair dismissal claims increases to $72,700.
National Minimum Wage (before statutory superannuation)
The national minimum wage is the minimum weekly wage payable to employees not covered by a modern award or enterprise agreement.
For modern award covered employees, minimum wages are increased by 3.5% rounded to the nearest 10 cents.
| 2017/2018 financial year | 2018/2019 financial year |
| $694.90 per week or $18.29 per hour | $719.20 per week or $18.93 per hour |
Tax free threshold for “genuine redundancy” payments
Where the redundancy of an employee is treated by the Australian Tax Office as a ‘genuine redundancy’ under section 83-175 of the Income Tax Assessment Act 1997, certain tax-free thresholds will apply to the payment (see Taxation Ruling TR 2009/2).
| 2017/2018 financial year | 2018/2019 financial year |
| First $10,155 tax free and $5,078 tax free for each completed year of service | First $10,399 tax free and $5,200 tax free for each completed year of service |
Superannuation – maximum contribution base
For the 2018/2019 financial year, employers must pay into each eligible employee’s superannuation account a minimum of 9.50% of the employee’s ordinary time earnings up to the ‘maximum contribution base’, the same percentage contribution as was payable in the 2017/2018 financial year.
| 2017/2018 financial year | 2018/2019 financial year |
| $52,760 per quarter | $54,030 per quarter |
Superannuation – concession contribution cap
Employers make concessional contributions (e.g. SG contributions and salary sacrifice contributions) on behalf of their eligible employees. Concessional contributions up to the cap are generally taxed at 15%, whereas contributions in excess of the cap can be included as assessable income and taxed at the employee’s marginal rate of income tax where the individual makes an election to do so. The employee will also be liable for the excess concessional contributions charge in these circumstances.
| 2017/2018 financial year | 2018/2019 financial year |
| Employee concessional contribution cap $25,000 per annum | Employee concessional contribution cap $25,000 per annum |
If you would like more information in relation to any of the new employment related thresholds, and in particular how to determine with certainty whether an employee’s earnings exceed the high income threshold and thus whether he or she can access the unfair dismissal jurisdiction, please contact one of our team members below.
This article was written by Mark Howard, Partner and Taylor Burt, Trainee Solicitor.
| Mark Howard
P: +61 3 8644 3673 E: mhoward@hwle.com.au |