Changes to superannuation

Key facts

• Australia’s compulsory superannuation system requires employers to pay a percentage of an employee’s earnings into their superannuation account.
• Each year until 2025, the amount of superannuation that must be paid to eligible employees will increase by 0.5 percent. Depending on your arrangements with your employees there are different ways that this increase can be accounted for.
• Employers should communicate the change to the superannuation amount including any impact this will have on an employee’s take home pay as soon as possible. 
• On 1 July 2022, the income threshold for payment of superannuation contributions was removed. This means that employees who earn less than $450 per month (and satisfy a range of other criteria) are now entitled to superannuation.

Superannuation amount to increase

The following table provides the past and future superannuation amount increases.

What does this mean for me as an employer? 

Employers should regularly review their wages arrangements with their employees to ensure that the correct superannuation guarantee contribution has been paid.

As these arrangements may impact how businesses budget for and pay your employees superannuation, it is important to consider the following scenarios.

Scenario 1:  Employee's salary includes super (the employee has a “Total Remuneration Package” (TRP)

Option 1

Employer may elect to take the additional 0.5 percent super from an employees salary as the employee is paid on a total package amount.

The employee will receive a reduced take home pay, however their TRP will not be impacted.

Option 2

Alternatively, the employer may elect to increase the employees TRP to account for the additional 0.5 percent super.

Scenario 2: Employee has a “Salary + Super” contract 

The employer is required to pay the additional 0.5 percent super for each employee.

The employer will pay more; however employees will not face any changes to their take home pay.

We strongly recommend that employers communicate these changes with their employees as soon as possible and prior to 1 July each year. 

Income threshold 

The entitlement to super payments depends on an employee meeting a number of criteria. This may include their employment status, age, weekly work hours, and income.

On 1 July 2022, the $450 per month income threshold was scrapped, meaning that employees earning less than $450 per month may be entitled to super.

We recommend the use of the ATO Super Guarantee Eligibility tool if you are unsure as to whether you are obligated to make super contributions to your employees.

Penalties

Employers who fail to pay the minimum amount of super guarantee to their eligible employees by the due date may receive a super guarantee charge (SGC).  The SGC is made up of:

• The amount of super owed to the employee; 
• Interest (currently 10 percent); and 
• Administration fee ($20 per employee, per quarter).

The ATO can take stronger action if an employer does not pay the SGC including court imposed fines, orders to pay up to 200 percent of the SGC amount, imprisonment or Director Penalty Notices to recover the unpaid SGC from Director’s personal assets. 

Find out more from ATO's website.