There are a few changes and developments coming to Superannuation Guarantee which all employers and employees need to be aware of.
Rate of Superannuation Guarantee increases to 10%
Effective from 1 July 2021, the minimum rate of Superannuation Guarantee will increase from 9.5% to 10% of an employee’s ordinary time earnings. Superannuation Guarantee does not include employee’s salary sacrifice superannuation.
The rate of Superannuation Guarantee is to increase to 12% by 1 July 2025. The rate of Superannuation Guarantee will increase incrementally by 0.5% every year on 1 July until 1 July 2025.
Employers will need to ensure their payroll systems are up to date to allow for these rate changes. Employees need to be aware this may impact on their net take home pay.
For example, if an employee is paid a salary package which includes superannuation guarantee and the rate of superannuation guarantee increases, then the salary component of their pay will decrease by the same amount. However, if an employee is paid based on an agreed salary or just wages for hours worked, then the 0.5% increase to superannuation guarantee will effectively be added to the employee’s pay at a cost to the employer.
Proposed Changes (not yet legislated)
Choice of Fund Changes
Currently, where an employee does not nominate a superannuation fund where their employer is to pay their superannuation contributions to, the employer will pay contributions to the employer’s nominated default fund.
It is proposed from 1 July 2021, where an employee does not nominate a superannuation fund, an employer will first need to check if the employee has a “stapled fund”. This will be an employee’s existing superannuation account that has been identified by the ATO. Where the employee has not nominated a fund and the ATO has not provided a stapled fund, the employer will pay contributions to the employer’s nominated default fund.
$450 Exclusion to be removed 1 July 2022
Currently, where an employee’s ordinary times earnings are less than $450 in a month, the employer is not required to provide Superannuation Guarantee on those earnings for that month. In the recent Federal Budget, the Government announced this exclusion will be removed with effect from 1 July 2022.
Should you require any assistance with any of the above or would like to meet to review and discuss your superannuation obligations, please do not hesitate to contact our office.