Superannuation Guarantee Rate Changes
Have you prepared for the Superannuation Guarantee rate rise on 1 July, 2021?
An increase to the superannuation guarantee (SG) is set to go ahead from 1 July which will see the base rate rise from 9.5% to 10%.
The Australian Government intends for this to be followed by incremental half percentage point increases each year to 12% on 1 July, 2025.
The super guarantee rate, which is the mandated amount that employers must contribute to their workers’ retirement savings, has been frozen at 9.5% since 2014. The idea behind the legislated increase to the SG rate is to bolster the savings that Australians ultimately have when they reach retirement age.
As with any change in superannuation, there are things for employers and employees to consider. If you’re not sure how the SG rate increase may affect you, your business or your hip pocket, do contact Hood Sweeney for assistance.
As a general guide, employers will need to be certain they have the correct payroll software in place to ensure accurate superannuation reporting from 1 July via Single Touch Payroll, or STP.
Employers will also need to communicate how the SG rate increase will affect their employees, which will be determined by how their superannuation is managed under their employment agreements.
“The rate rise will affect employees differently depending on their employment arrangements,” said Matthew Bartemucci, an Associate in Accounting & Business Advisory at Hood Sweeney.
“To help manage the impact of the change, employers should communicate with their employees about what it means for them,” said Mr Bartemucci.
In addition, employees who salary-package their super may need to check if the 0.5 of a percentage point increase will tip them over their annual concessional contributions cap of $27,500 from 1 July.
It’s important for everyone to note that this is not a once-off increase. Employers need to prepare for 0.5 of a percentage point increases until the SG rate reaches 12% in 2025, so it’s imperative to get the process in order from the get go.
As an employee, if you’re paid $450 or more (pre-tax) each month, your employer generally has to pay you SG contributions, regardless of whether you’re full-time, part-time or casual.
However, this $450 threshold is proposed to be scrapped by 1 July, 2022, following the release of the government’s 2021 Budget. This means that after this date, even if you are not earning $450 or more a month, you could still be eligible to receive superannuation from your employer.
If you’re under 18 or a domestic or private worker (such as a nanny or housekeeper), you must also work more than 30 hours per week to be eligible for SG payments.
Employers must pay super to some contractors as well, even if they quote an Australian Business Number (ABN). Temporary residents, such as those on visas, are also typically eligible for SG payments.
For more information on payroll software, to discuss your HR function and employment agreements, or for further assistance with the SG rate increase, please contact Hood Sweeney on 1300 764 200.