A number of employment related financial thresholds are indexed annually each 1 July. Below is a summary of some important changes which were effective from 1 July 2020.
High income threshold: Why is the high income threshold important?
Employees whose annual earnings are 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;
- Any amounts applied or dealt with on their behalf (e.g. superannuation top ups or salary sacrifice); and
- The agreed value of non-monetary benefits (e.g. use of a 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 for business expenses; and
- Superannuation guarantee contributions that the employer is required to make.
High income threshold and unfair dismissal compensation limit
| 2019/2020 financial year | 2020/2021 financial year |
| $148,700 | $153,600 |
The compensation limit for unfair dismissal claims increases to $76,800.
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 (subject to the exceptions below), minimum wages are increased by 1.75% from the first full pay period on or after 1 July 2020.
Increases to minimum award wages will be staggered depending on the impact of COVID-19 on certain sectors (with those least impacted rising first):
- 1 July 2020: modern awards applying to frontline healthcare and social assistance workers, teachers and childcare workers, and employees engaged in other essential services;
- 1 November 2020: modern awards applying to construction, manufacturing, vet services, horticulture and higher education; and
- 1 February 2021: modern awards applying to accommodation and food services, arts and recreation services, aviation, retail trade and tourism.
| 2019/2020 financial year | 2020/2021 financial year |
| $740.80 per week or $19.49 per hour. | $753.80 per week or $19.84 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 a genuine redundancy payment paid to the employee (see Taxation Ruling TR 2009/2).
| 2019/2020 financial year | 2020/2021 financial year |
| First $10,638 tax free and $5,320 tax free for each completed year of service. | First $10,989 tax free and $5,496 tax free for each completed year of service. |
Superannuation – Super guarantee and maximum contribution base
Employers must pay superannuation guarantee (SG) for eligible employees at a rate of 9.5% of each employee’s ordinary time earnings (OTE). This rate has not changed for the 2020/2021 financial year. SG is only payable on OTE up to the ‘maximum contribution base’, which has increased to $55,270 per quarter for the 2020/2021 financial year.
| 2019/2020 financial year | 2020/2021 financial year |
| $55,270 per quarter. | $57,090 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 are generally included as assessable income and taxed at the employee’s marginal rate of income tax (unless the employee elects to withdraw the excess contributions). The employee may also be liable for the excess concessional contributions charge in these circumstances.
From 1 July 2018 employees can accrue and carry forward unused concessional contributions cap amounts from prior years (the carry forward rule). In the 2019/2020 financial year employees could use the carry forward rule to increase their concessional contributions cap by the unused portion of their 2018/2019 concessional contributions cap. This carry forward rule will also transition to the 2020/2021 year. Employees can only use the carry forward rule if their total superannuation balance was less than $500,000 on 30 June of the previous financial year.
| 2019/2020 financial year | 2020/2021 financial year |
| Employee concessional contribution cap $25,000 per annum. | Employee concessional contribution cap $25,000 per annum*. |
*unless increased using the carry forward rule.
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 Workplace Relations and Safety Team members below.
This article was written by Mark Howard, Partner, Shaun Cartoon, Partner and Mathew Reiman, Associate.
